*Author’s Note: I know I promised a different article this week, but things are moving faster than ever and I thought you’d prefer to hear answers to some topical issues right away. The article on Insurance, Landlords and the Law will follow as planned next week!
What does Brexit mean for the property market?
Falling oil prices, Brexit, and the possibility of President Trump – no wonder people are confused about what is going to happen next! When it seems hard to understand the world around you, making sensible, long term financial decisions can seem daunting, which is why I’m often asked what I think about the future of the property market. Honestly? Anyone who tells you that they know for certain what is going to happen to any financial market or investment is either overconfident or trying to sell you some kind of magic beans. But a careful investor can look to the market, do some research, and be confident that they have figured out the likely overall market direction or trend. I sat down this week with our very experienced business development manager, Jasmine Clay, and we boiled down the big picture to a few salient points:
- Average home prices in the East Midlands are up 3.9% since last year*
- Meaning that the average property investment made last year would be giving a better return than a typical savings account.
- Average “Time to Sell” has fallen since last year*
- Meaning that people are selling good houses quickly due to high demand.
- Interest rates have just been cut to a record low.
- Recently cut from an already historical low, rates tend to rise only when the Bank of England wishes to reign in inflation or increase the cost of borrowing. Right now their strategy is just the opposite: to encourage lending and spending to bolster the economy.
- This means that mortgage rates are likely to remain low, and indeed the new 10-year fixed mortgages available show that lenders also believe this will continue for quite a long time yet.
- The rate cut was supported by a £100bn scheme aimed at forcing lenders to pass this cut on to customers.
- Continuing significant imbalance between housing supply and demand.
- Everyone has to live somewhere, and there are not enough homes being built to keep up with that demand.
- “The summary so far based on two weeks of post-Brexit-vote statistics is that the housing market remains steady, underpinned by the same fundamentals that have led to its recovery since the last downturn.” - Rightmove
- The average house price in the UK is £211,230, up 8.2% from the previous year. **
- The average wage in the UK is £24,096**. As a very rough guide, lenders may consider up to 4x salary as a good lending figure, so that would mean taking a mortgage of £96,384. So someone in those circumstances would need a £114,846 deposit, plus thousands more for legal fees and stamp duty…
*Rightmove Property Report, July 2016
**Office of National Statistics, May 2016
So in short, demand is high, the cost of borrowing is lower than ever, and with interest rates so low, savvy investors are looking for ways to get a return on their money that is far better than anything a bank can offer.
For these reasons, and others, I believe that investing in property will remain a great option for many years to come. In fact, we have already seen a renewed interest from property investors, alongside undimmed interest from tenants in the wake of the Brexit vote.
My advice to anyone is this; if you do your research, or find a reputable lettings agency that will give you good advice on where to invest locally, you can expect a great long-term investment for the future. As ever, if you need any help, or have a specific question you’d like answered, you can email or call me and my team using the links below.
Best of luck!