Q: Should I postpone any purchase because of the possibility of a no-deal Brexit. Some people believe property prices will go up while others believe that prices will fall. So I can’t decide whether it’s the right time to buy or whether I should wait. Can you tell me what to do?
A Unfortunately I don’t have a crystal ball so I can’t tell you what to do and I can’t say what kind of Brexit we have next March.
I can however state some facts and state some predictions from experts. The most talked about prediction was from the governor of the Bank of England Mark Carney which he had warned that with a worst case scenario Brexit (no deal) the economy would suffer, unemployment, consumer prices and interest rates could rise and house prices could fall as much as 25% to 30%.
I hear this quote a lot of the time, what you don’t hear is what Mark Carney said a day later and “That’s not a prediction of what is going to happen,” which he told an event in Dublin a day after. It is understood this was the worst of three no-deal scenarios presented to ministers and is in line with the Bank’s 2017 stress-test scenario that also envisaged unemployment rising to 9.5%, from the current level of 4%, and interest rates jumping to 4%, from 0.75% today.
So from hearing this is you feel that prices could fall you could have a point. On the other hand, after the fall out of the last UK recession if I had to tell clients back in 2007/2008 at the peak of the property crash that in 10 years’ time London House prices will rise to nearly double they would have probably laughed me out the building. Fast forward 10 years and they pretty much have and every client I had who had brought before and after the last recession in London has done very well.
Back near the beginning of the year, experts were predicting that house prices would stop going up or, at the very least, go up by no more than 1%. They weren’t far off but according to figures recently published by Halifax reported the slowest annual rate of house price growth for five years, at 1.5 per cent, this slowdown is unlikely to turn into an actual fall in the market in the short term, and the Halifax still expects the outcome for the year as a whole to be an increase of between 0 and 3 per cent.
Some areas in the UK have seen great growth over the course of the year which has not deterred many investors area such as Manchester, Birmingham and Liverpool have seen strong property prices growths. Even some areas in London are still outperforming the local areas but I would say property investments now need more research than ever in finding the right property where there is more emphasis on location, regeneration, demand as well as the size, aspect and finish of the property.
So if you’re thinking of Investing in UK property looking at all the goings on it is most likely leaving people more confused, which a lot of investors would be feeling. But if like me you feel that in all honesty no one can predict the future so if you want to invest in UK property make a decision based on things which you can find out such as investment and infrastructure and demand going into an area (which will increase property values), rather than those such fall out from Brexit which no one knows.
Even though it’s a buyers market, that doesn’t necessarily mean every property on the market is obtainable at a discount. Similarly to how potential buyers and investors are waiting to see what will happen with Brexit before making a purchase, sellers who aren’t in a rush to sell are also not willing to reduce their asking prices on the flip side of thing Brexit negotiations are successful and they miss out on selling a property they could have sold at a higher price purely due to market speculation on an outcome on something that has not yet happened.
So if you’ve done your research the area and the property has solid fundamentals to grow in value, looking to hold onto it for a number of years and gone through the numbers of how much it will cost to hold, I’d be tempted not to wait as you may run the risk of losing it if you do and/or having to pay a higher price.
The current market actually provides plenty of opportunity from sellers who are motivated– for those landlords who have grown and adapted with the changes. Those landlords that are selling up due to new tax implications are freeing up properties, often in areas of high rental demand, which those investors sticking around can snap up. With developers that are nearing completion on their sites better deals are to be had which again investors are buying up.
If you are thinking of buying a property after Brexit then there is no harm in starting researching what areas and sites would be the places you would look to invest now so you are prepared and ready to make that investment jump.