I have been asked a number of times recently
what a hard Brexit would mean to the Southampton property market. To be frank,
I have been holding off giving my thoughts, as I did not want to add fuel to
the stories being banded around in the national press. However, it’s obviously
a topic that you as Southampton buy to let landlords and Southampton homeowners
are interested in ... so I am going to try and give you what I consider a fair
and unbiased piece on what would happen if a hard Brexit takes place in March
2019.
After the weather and football, the
British obsession on the UK property market is without comparison to any other
country in the world. I swear The Daily Mail has the state of the country’s
property market on its standard weekly rotation of front-page stories! Like I
have said before on my blog, there are better economic indexes and statistics to
judge the economy (and more importantly) the property market. If you recall, I
said the number of transactions was just as important, if not more, as a
bellwether of the state of the property market.
Worries that the Brexit referendum would
lead to a fast crash in Southampton (and national) property values were
unfounded, although the growth of property values in Southampton has reduced
since the referendum in the summer of 2016.
Now, it’s true
the Southampton property market is seeing less people sell and move and the
property values are rising at a slower rate in 2018 compared to the heady days
of the first half of this decade (2010 to 2015), but before we all start
panicking, let’s ask ourselves, what exactly has happened in the last couple of
years since the Brexit vote?
Southampton
house prices have risen by 7.28% since the
EU
Referendum...
...and yes, in 2018 we are on track (and
again this is projected) to finish on 3,594 property transactions (i.e. the
number of people selling their home) ... which is less than 2017 ... but still higher
than the long term 12 year average of 3,419 transactions in the local council
area.
So, it appears the EU vote hasn’t caused
many major issues so far, however, if there was a large economic jolt, that
could be a different game, yet how likely is that?
The property market is mostly
influenced by interest rates and salaries.
A hard Brexit would subdue wage growth
to some degree, yet the level of the change will depend on the undetermined type
of Brexit deal (or no deal). If trade barriers are imposed on a hard Brexit,
imports will become more expensive, inflation will rise and growth will fall,
although at least we are not in the Euro, meaning this could be tempered by the
exchange rate of the Pound against the Euro. In plain language, a hard Brexit
will be worse for house prices than a deal.
So why did the Governor of the Bank of England suggest
a disorderly hard Brexit would affect house prices by up to 35%?
I mean it
was only nine years ago we went through the global financial crisis with the
credit crunch. Nationally, in most locations including Southampton, property
values dropped in value by 16% to 19% over an 18-month period. Look at the
graph and if we had a similar percentage drop, it would only take us back to
the property value levels we were achieving in 2015.
And let’s not forget that the Bank of England introduced
some measures to ensure we didn’t have another bubble in any future property
market. One of the biggest factors of the 2009 property crash was the level of
irresponsible lending by the banks. The Bank of England Mortgage Market Review
of 2014 forced Banks to lend on how much borrowers had left after regular
expenditure, rather than on their income. Income multipliers that were 8 or 9
times income pre-credit crunch were significantly curtailed (meaning a Bank could
only offer a small number of residential mortgages above 4.5 times income), and
that Banks had to assess whether the borrower could afford the mortgage if
interest rates at the time of lending rose by three percentage points over the
first five years of the loan ... meaning all the major possible stumbling
blocks have been mostly weeded out of the system.
So, what next?
A lot of Southampton homeowners might wait until 2019 to
move, meaning less choice for buyers, especially in the desirable areas of Southampton.
For Southampton landlords, Southampton tenants are also likely to hang off
moving until next year, although I suspect (as we had this on the run up to the
2015 General Election when it was thought Labour might get into Government),
during the lull, there could be some Southampton buy to let bargains to be had
from people having to move (Brexit or No Brexit) or the usual panic selling at
times of uncertainty.
Brexit, No Brexit, Hard Brexit … in the whole scheme of
things, it will be another footnote to history in a decade. We have survived
the Oil Crisis, 20%+ Hyperinflation in the 1970’s, Mass Unemployment in the
1980s, Interest Rates of 15% in 1990’s, the Global Financial Crash in 2009 ...
whatever happens, happens. People still need houses and a roof over their head.
If property values drop, it is only a paper drop in value ... because you only lose when you actually sell. Long term, we aren’t building
enough homes, and so, as I always say, property is a long game no matter what
happens - the property market will always come good.
Growth in UK property values as well as in Southampton seems
fated to slow over the next five to ten years, whatever sort of Brexit takes
place.
If you are thinking of selling your Southampton home or if you are a Southampton landlord, hoping to sell your buy to let property (with tenants in), either way, if you want a chat to ensure you get a decent price with minimal fuss ... drop me a message or pick up the phone.
If you are looking for an agent that is well established, professional andcommunicative, then contact us to find out how we can get the best out of your investment property.
Email me on brian.linehan@belvoirlettings.com or call on 023 8001 8222.
Don't forget to visit the links below to view back dated deals and Southampton Property News.
Twitter, https://twitter.com/sotonbelvoir
LinkedIn, https://www.linkedin.com/in/brianlinehan
LinkedIn, https://www.linkedin.com/in/brianlinehan
Thanks for sharing this informative blog with us...
ReplyDeletehttps://airpropty.com