To put some of this into perspective:
On the currency front, it was probably inevitable that sterling would fall in value on the back of a leave vote as it had been trading strongly on the day of the vote (£0.67 against the dollar) when all the indicators were pointing to a remain result. It is also perfectly natural for the stock markets to go through a period of volatility following such a momentous referendum result. It would be odd if they didn’t.
The news of the property funds suspending trading is making a big splash with the media, primarily because it's a great doom and gloom headline. But again this is a logical decision to have taken in response to investors rushing to withdraw funds at a time when there would be great difficulty in actually valuing the units in the funds because of market volatility. In addition to that, there is a view that many of the funds went into the referendum vote very cash heavy - some were reported to be only 70% invested, with the rest in stocks or cash. On one view therefore, the trading freezes could be viewed as more about calming the markets and promoting order, and less about actually funding the exit of capital.
Regardless of the whys, the whens and the what-ifs, there is no doubt that the short term consequences in just two weeks have been staggering.
So will the UK actually leave the EU
It now seems that there is no realistic prospect of a second referendum asking exactly the same question. There is precedent for EU member states coming back with a slightly different question when they have not liked the first answer, but this particular referendum asked such a clear question (leave or remain?) that a second referendum feels too undemocratic.
There is a process contained in the Referendum Act for instigating judicial review of the referendum result. That would involve contesting the votes cast or number of ballot papers counted, however there has been no suggestion of anyone thinking of instigating such proceedings.
So it seems extremely likely that the UK will be moving towards leaving the EU. At a time when uncertainty is one of our biggest enemies, that clarity is probably quite helpful.
What has to happen next
As we all now know (because the whole country are all suddenly experts on EU constitutional law) the legal process for withdrawing from the EU is triggered by giving an Article 50 notice. That starts a two year negotiation process to agree the terms of the UK's exit, and if agreement cannot be reached within that two year period (and all parties to the negotiations have not agreed to extend that period), then EU law simply ceases to apply to the UK after the expiry of that period. Again, that is another morsel of certainty that is quite helpful to chew on.
Prior to the referendum, most of us would have assumed that the Article 50 trigger would have been pulled relatively quickly after a leave vote. Two things have got in the way of that.
Firstly, David Cameron's resignation, in terms of which he has made it clear that he will be leaving that to his successor. That means that the two year period won't start until September at the earliest.
Secondly, it is being argued that an Act of Parliament will need to be passed to allow the UK Government to legally issue an Article 50 notification. In other words, the UK Government cannot just go off and trigger Article 50 on the back of the referendum vote. This is the first of many complicated questions of constitutional law that are going to have to be grappled with over the next two years and beyond, and can therefore be filed under the "forthcoming attractions" heading.
What might happen
One option is for the UK to take up a position in the European Economic Area ("EEA") and the European Free Trade Association ("EFTA"). That would allow the UK access to the Single Market, but from a position outwith the EU. The fact that the UK is already a contracting party to the EEA agreement would also mean that this would be one of the less challenging outcomes from a legal perspective. From a political perspective, however, that outcome will need some serious negotiation.
Timescales
The political rather than the legal drivers will be the key to how long this will all take.
If we assume that an Act of Parliament needs to be passed before Article 50 can be triggered, then in terms of timescales we will have to factor in the process for a full debate and vote in Parliament to pass the necessary legislation. The drafting and passing of the Act could be done relatively quickly - a matter of weeks rather than months. In theory, MPs who voted remain could use that vote to block the Act, but in practice they will surely vote to give effect to the will of the British people in the referendum.
Once that Act is passed and in force, the Article 50 notice could safely be given, and we are then into the two year negotiation process. Strictly speaking there can be no going back from that, however there does remain the possibility of the UK cutting a better deal in post-Article 50 negotiations than David Cameron managed pre-referendum, and if there were any material concessions then that might, perish the thought, justify another referendum. That scenario may be seen as more likely rather than less likely if the member states are allowed to negotiate with the UK directly (rather than via the EU Commission) as Germany to name but one member state does seem to be expressing a more sympathetic view towards the UK's position.
Exactly what kind of deal the UK ends up with is impossible to predict at the moment. And the answer to that question is not made any clearer by the political disarray surrounding who exactly is going to lead these negotiations on behalf of the UK. Not the current Prime Minister. Not the leader of the leave campaign. Probably not the current leader of the opposition. And definitely not the leader of UKIP. Again, however, the question of who is going to lead negotiations on behalf of the UK should be clear by October this year.
,Commercial property
All of the above, however fascinating, does not help the UK economy which needs stability and certainty to prosper. And no sector in the UK is more adversely affected by uncertainty than the commercial property sector. We saw in 2008 onwards that values can fall quickly, transactions can dry up and that it can take our sector a long time to recover.
It is important, however, to remember that the current downturn is different in so many ways to that of 2008. Back then, one of the biggest issues was a lack of liquidity, coupled with a general sense that values needed to be reset anyway as the bubble had simply got too big. Let us not also forget that 2008 was a global recession. This time round the fundamentals are much stronger. There is plenty of money that would like to find a home in the commercial property sector. Values are more sensible and therefore our recovery in commercial property has felt (until two weeks ago) much more sustainable. What we have this time around is a politically-driven downturn, which has not been caused by any fundamental economic drivers. It is therefore a period of political uncertainty, as contrasted quite markedly with a financial crisis.
In the two year period up to the referendum we had seen steady growth in transactional activity in commercial property in Scotland. Even in the weeks leading up to the vote there had only been a slight slowdown as some deals paused until after the result. Other deals were concluded subject to Brexit clauses - essentially the option to pull out if the vote was to leave the EU. But across the sector as a whole, appetite for property investment remained strong.
Morton Fraser did commission a YouGov poll earlier this year into investor sentiment in Scotland, and indeed the rest of the UK. In one part of the research, 85% of those polled said that an exit from the EU would not affect their decision to invest in Scotland. I think we can add to that conclusion the phrase "all other things being equal".
Certainly within the Morton Fraser real estate client base we have a range of views on the implications of Brexit. Some of our investment clients see this as an opportunity, and are very enthusiastic about the future deal pipeline, even in the short term. Other clients have taken the opportunity to sit tight for two or three weeks and reassess their strategy. Most of those are looking for the dust to settle on the political fall-out. Again, these clients do have money to invest in property in Scotland and the wider UK, so it is not, for the moment at least, the health of the sector or the economy that is holding them back. It is the political uncertainty and the wider consequences that flow from that.
Occupier demand, which underpins everything in the world of commercial property, is still strong across most real estate sub-sectors - office, retail, leisure, industrial and PRS. In the student accommodation sub-sector there is still strong demand for high quality space, and any potential impact that exiting the EU may have on EU student numbers might be set off by the fact that the majority of foreign students studying in the UK come from outwith the EU. The housebuilding sector has had a bit of a shaky two weeks, but that is mainly down to the share prices of the major PLCs taking a tanking in the aftermath of the vote. There is still a Government commitment to build new homes, which is well short of target, and there is still a huge demand, which is unlikely to go away unless there is a significant rise in interest rates (at the time of writing, interest rates look more likely to go down rather than up).
So in terms of fundamentals, if occupier demand stays strong there is no obvious reason for property investment transactions to stall, and if the banks continue to lend then it seems likely that property development projects will keep going in order to meet the undersupply.
In summary, what we face at the moment is an extreme upheaval and constitutional uncertainty. All of that will, for better or worse, resolve itself relatively quickly. Article 50 looks almost certain to be triggered by whoever ends up being the new PM. And within two years of that trigger, the UK should have ceased to be a member of the EU, and will possibly have stayed in the EEA and re-joined the EFTA.
When you boil it down like that, the ultimate destination starts to look like quite a sensible place in the circumstances, and the roadmap to get there does not look at all unachievable.
There will be consequences and undoubtedly there will be choppy waters ahead, but with that will come opportunities for those willing to take them. What we don't need are doom and gloom merchants talking the sector down at a time when the fundamentals are actually still quite strong.
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