Brexit and the housing market
What will the impact of Brexit be on housing?
Should I buy a house now or wait until after Brexit?
Is it a bad time to buy because of Brexit?
Should I buy an investment property right now, or wait until Brexit is sorted?
If I knew, I’d tell you. Honestly I would. But I don’t. So I can’t. So I won’t.
I’m not going to get all political on you, whether you want in or out of Europe – I assume you have your reasons and they are probably good ones.
But what I can do is look at some of the facts that might make a difference to whether or not now is a good / bad / indifferent time to be buying a house.
I won’t get too boring, but one of the basic fundamental principles of Economics is the law of Supply & Demand.
If there is a lot of something, and not many people want it, then it’s cheap.For example, how much would you pay for some sand?
If there isn’t much of something, and loads of people want it, then it’s expensive.For example, how much would you pay for some gold?
So with this in mind, we need to look at how much supply there is of property versus how much demand there is for it. Fundamentally that is what holds up the housing market in the UK.
The UK hasn’t built enough houses each year for decades, so we’ve had a supply issue for years. Throw in the uncertainty people have around Brexit and it’s causing a lot of people to delay moving. This is restricting the number of properties that come on the market for sale.
If there are genuine supply issues with materials and labour once Brexit happens, then the house builders are likely to have additional problems actually building new homes for the sale market.
All these things are restricting the supply of housing on the market.
Oh, and there’s also that whole Island thing. We aren’t making any more land, so that’s slightly restricting.
Back in the day it was normal to live with your parents until you bought a home with your partner and started your own family. Nowadays people move out of the family home much earlier and want to live alone (usually in rented accommodation), and then a significant portion of people are buying their first home as a singleton.
Add in the higher incidence of divorcees living alone, and the demand for housing has been steadily increasing as social factors have influenced how we live.
On a short-term basis, demand has taken a bit of a dip as people aren’t sure what Brexit will mean for them. So there are fewer people looking to buy properties right now.
Lower supply & lower demand = consistent prices.
In the RICS UK Housing Market forecast for 2019 the prediction was that the number of sales of properties will go down, but the price of houses will remain static.
What does it mean for you?
First time buyer
If you’re looking to buy your first home, your choice of house might be a little bit restricted at the moment, but chances are you won’t have a great deal of competition for properties. You can potentially afford to be picky and slightly cheeky with your offers, in the hope of finding someone who HAS to sell, rather than someone who just wants to.
Whether you buy now, or at any point in 2019 it’s probably not going to make a difference. Keep an eye out for bargains and negotiate hard.
You’re probably not going to notice much – if any – difference. Any saving you make on a property you buy, chances are there will be some cheeky monkey demanding savings off your asking price as well.
No need to wait, it’s unlikely to benefit you if you find the right house to move to.
Due to the lack of sales activity, there’s likely to be an increase in demand for rental properties, so rent prices are likely to increase over the next 12 months. Because there are fewer buyers in the market, you can be quite hard with your negotiations and try to pick up a bargain.
But don’t feel rushed into it, like the first-time buyer, you have all year to look around and get the right deal.
What if I’m wrong?
I can almost guarantee you that I am wrong. But I’m unlikely to be as wrong as Mark Carney with his 30% drop in house prices if we have a disorderly Brexit.
Ask anyone you know who owns a house these questions.
- How much do you think your house is worth?
- Would you sell it for 30% less?
If the average house price is £220,000 how many people do you think would take £154,000 for it? It’s weirdly ingrained in the British psyche that property always goes up in value. So most people if they were offered £154k for their “£220k” house, would rather wait it out.
This gives a natural flooring to any house price crashes in the UK.
What should you do?
But, even so, I might be wrong. In which case you need to make sure you’re as protected as you possibly can be when you go ahead with a property purchase.
- Ensure you don’t over stretch yourself with what you can afford each month
- Consider fixing your payments so you don’t have to worry about interest rate movements for a period of time
- Consider the impact of any house price drop in relation to what percentage Loan to Value mortgage you get
Reviewing your circumstances with an advisor is critical to making sure you get the right deal for you, so if you are on the fence, or want to discuss your house buying options and strategies feel free to give me a call and we can review what might be best for you.