Political Risk Affects Real Estate Markets

Using data from the recent referendum in Britain to leave the E.U., we document a link between political uncertainty and real estate values. Specifically, we find that real estate values in areas of London that have a high concentration of E.U. passport holders declined significantly more than the rest of the city following the Brexit vote. In addition, we find that areas with concentration of highly-educated residents also experienced a disproportionately large price decline. These findings suggest that real estate markets are forward looking, incorporate information quickly, and are segmented.