EU referendum: Why I identified 23 May as the date of maximum pre-referendum fear - and why it offers a great opportunity to buy up commercial property

Walter Boettcher
Fright Cure
Be afraid, be very afraid.... then buy property (Source: Getty)

It is often said that if you repeat something enough, you will eventually come to believe it, even if you have forgotten its underlying truth.

Saying it presents the risk of being called to account - as has been aptly demonstrated recently in the EU referendum debate.

One such statement that I have made repeatedly is that at the point of maximum pre-referendum fear, investors should buy commercial property – ‘hoover up’ was the exact expression – because "there must be at least 50 bps of yield compression waiting on the other side".

In common language, this means that if you buy at this point, you will profit substantially (10 per cent to 15 per cent for prime property assets).

This, of course, assumes that a vote ‘to remain’ in the EU is the all but certain outcome. For veteran property analysts the comment is received less as real advice and more as a rhetorical, if glib, device to liven up an otherwise dry discussion.

Surprisingly, several investors in my sundry audiences admit to sharing the view and were pleased to have heard it presented in a ‘legitimate’ forum.

Recently, I was challenged to identify precisely the point of maximum pre-referendum fear. I do not remember offering a date, but apparently a date I did offer... 23 May to be sure.

I was reminded of this by an email from a senior fund manager of a very large fund. For the fund, 23 May was not a buy opportunity; it was a sell opportunity for assets deemed unfit for the fund.

So at the least, a market for this point of maximum fear exists - that is, willing buyers and willing sellers.

On 23 March, the Financial Policy Committee finally announced that the EU Referendum was a risk. My comment was, therefore, not fanciful, but addressed a palpable fear that is now officially part of the financial stability equation. As for the date, it is linked to data releases, political events, media coverage and how these feed the fear.

On 27 April, first quarter GDP will be released by the ONS. It will disappoint, as will 5 May Markit PMI data which may show the UK flirting with economic stagnation.

UK local elections fall on 5 May, a new London mayor will be elected and the Tories are fielding a pro-Brexit candidate. Public finance data, labour data, CPI, RPI, not to mention Europe and the US election, it is all there in the runes to be read.

The date of maximum fear is a Monday when one-month sterling futures contracts will begin to cover referendum day on 23 June. Hedging will determine pricing and an already weakened pound may plummet.

Perhaps this is when the realisation of what is at stake for UK business and property becomes clear to the ambivalent and the indifferent.

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