63% of Bexley voted to leave the EU – What now for Bexley Landlords and Homeowners?
As most of the polls suggested
a Remain vote, most of us were surprised when David Dimbleby announced that the
UK will be leaving the EU. The pound has dropped 6% this morning, after the City
whizz kids got their predictions wrong. MPs from the Remain camp are saying
things like “challenging times ahead”.
…
and now the vote has been cast - what next for the 82464 Bexley homeowners,
especially the 45598 with a mortgage?
In the campaign, the Chancellor
suggested property prices would drop by 18% in the event of a Leave vote. Using
Treasury estimates, their method of calculating this was tenuous at best. It focused on an
abrupt and hasty increase in UK interest rates, raising the cost of mortgages,
and creating lower demand for property, causing a drop in prices. I have to
agree that this will probably happen. Where I differ, however, is in the
detail. While property values in Bexley are likely to cool off in the coming 12 to
18 months, I doubt that it will be by as much as 18%. The UK property market is quite a monster.
Since the last In/Out EU Referendum in June 1975,
property values in Bexley have risen by 2177.8%
No, that isn’t a typo! Whilst
property prices did drop nationally by 18.7% between the peak of 2007 and the bottom
of the market in 2009, when one compares property values with that all-time
high of 2007 (the period before the financial crisis of the Credit Crunch of
2008/9), they are still 10.14% higher.
Another Credit Crunch?
Despite the Credit Crunch,
the worst global economic outlook since the 1930s and the recent recession,
just a few years after it started, in 2012-14 the government was panicking that
the housing market was a runaway train. Now the same doom-mongers and the
soothsayers who predicted soup kitchens in 2008/9 are predicting Brexit
meltdown. The reality is that bad news sells newspapers. Stock markets rise and
fall, but Britons continued to buy property in 2009/10 and beyond. Aspiring
first time buyers and buy-to-let landlords dusted themselves down, took a deep
breath and carried on buying; because we Brits love our bricks and mortar!
In the past, UK interest rates
have risen to reverse drops in the pound. Whilst a cheaper pound will make your
pint of Sangria a little more expensive on your Spanish holiday and make your
brand new BMW pricier, it will make British exports cheaper – and that’s good
for the economy.
Interest rates
Since 2009, interest rates
have been at 0.5% and lots of people have become accustomed to this. Will it be
the end of the world if rates rise? Interest rates in the 1986/88 property boom
were 9.25% on average. In the 1990’s they were around 6.5% and, during the
height of the boom, when property values were rising by 20% a year for three or
four straight years, they were at 4.5%. Anyone aged fifty or more will remember
interest rates having been at 15%.
Personally, I suspect that
interest rates won’t rise that much, as Matt Carney, chief of the Bank of
England, knows that raising interest rates causes deflation – the last thing
the British economy needs right now. In fact, they have been printing money
(aka quantitative easing) for the last few years (which causes inflation) to
the tune of £375bn a month. A bit of inflation because the pound has slipped on
the money markets (not too much, mind you) might be a good thing!
Whilst property values might
drop in the country, they will bounce back. It’s only a paper loss and it only
becomes real if you sell. If you have to sell, and most people move up-market
when they sell, whilst your property might have dropped by 5% or 10%, the one
you want to buy will have dropped by the same amount. The best part is that you
will actually be better off because the more expensive property will have
come down in value more (in actual pound notes) than the one you are selling.
The Bexley
landlords of the 13350 Bexley buy-to-let properties have nothing to
fear, and nor do their 33186 tenants.
Buy-to-let is a long term
investment. The next few months might see some bargains in this area as some
people tend to panic, regardless of what the evidence suggests. Even if we were
to pull up the drawbridge at Dover, stopping immigration today, the British
population will still increase at a rate exceeding the current property
building level. Britain is building 139,600 properties a year but, according to
the eminent Barker Review of Housing Supply Report, needs to build about 250,000 just to stand still. As the birth rate is increasing, the population
is living longer. Just under a quarter of all UK households are now occupied by
a single person. Demand is going up whilst supply is stifled, which equals
higher prices. That is a simple fact.
So, what will happen next?
There are many
challenges ahead. The country has spoken and we are in unchartered territory. But
we have been through a couple of World Wars, an oil crisis, Black Monday, Black
Wednesday, 15% interest rates and a Credit Crunch… and we survived! And the
value of your Bexley property? It might
have a short term wobble… but in the long term it’s safe as houses!
One place for landlords and
homeowners to find this information is on the Bexley Borough Property News
Blog: www.bexleyproperty.co.uk You’re also more than welcome to give us a call on 01322
559955 or pop in for a chat. Our office is located in the heart of Bexley
Village (next door to the King’s Head Public House).
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