Buying before BREXIT – what you need to know
The EU Referendum caused a number of property pundits to speculate about the future of the UK’s housing market should we choose Brexit, but now the dust surrounding the decision has settled, experts are able to make more informed projections about the impact.
Initially, the result was one of panic. A number of domestic buyers pulled out of transactions, but foreign buyers saw an opportunity to cash in on high-value properties for less as the pound dropped. This meant that estate agents were frantically relisting properties, especially those in traditionally expensive markets like Prime Central London. A recent study showed that this market has already shown considerable slowdown over the past 18 months, owing to both changes to stamp duty and the referendum. During this time period, the average price softened by 8 per cent, while across the wider capital, prices fell by 1.4 per cent.
But is it really all doom and gloom? Brexit may have caused some panic and price correction initially, but there are both pros and cons to buying, selling and staying put while the finer details of the exit strategy are worked out. If you’re thinking about buying property before Brexit, there are some things to consider that can help with your decision-making….
Where are you buying?
If you are buying in central London, be prepared to battle intense competition from international buyers. One local specialist mortgage broker reported to Homes & Property that they have experienced a 50 per cent uptick in enquiries from overseas since Brexit. However, some developers may be keen to hold off adding any more stock owing to uncertainty, or may experience a labour shortage that prohibits them from doing so (more on that later), and so this lack of supply could still prop up demand for pricey city centre addresses.
Are you a homeowner or investor?
This is something to consider when deciding whether or not to buy; for example, if you’re a homeowner in need of more space owing to a growing family, as the saying goes, needs must. People will always need to buy houses based on personal circumstances. For landlords, some experts have warned of rents becoming lower, given that potential reduced rates of immigration could lessen the demand for property. However, there are no immediate signs that this is likely to happen, and if anything, a softening of property prices could enable landlords to cover their mortgage and plenty more through rent, thus actually increasing your cash flow.
Are you a cash buyer, or do you need a mortgage?
If you’re an investor looking to buy your next property with cash, the current state of the lending market won’t matter much to you. If you are a landlord or homebuyer looking to seek a mortgage however, the fact that the interest rate is at a historic low of 0.25 per cent is something many will want to take advantage of on a fixed-rate basis. That said, some lenders might tighten their criteria, which could make it potentially harder to obtain a mortgage.
What are your needs?
Why are you looking to buy? Worries about losing money on the sale of your current home due to price depreciation, needing to upsize or downsize, or relocating for work are all reasons that can impact your need to buy. You may wish to seize the opportunity of lower prices to take the first step onto the buy-to-let ladder, however, this may prove to be a false economy in inflated rental markets if the demand should wane. Working with an investment specialist, financial planner or even your estate agent can help you decide whether you’re looking to buy for the right reasons.
Consider the lack of housing stock
There have long been Government plans to build more new homes, but these targets have yet to be met. Figures show that an estimated 12 per cent of the nation’s construction workers were born abroad, a figure that rises to 23 per cent in the capital, and this is something that could naturally impact the ability to meet these targets post-Brexit. If stock lies empty, prices will depreciate, whereas a lack of supply in areas of high demand will support prices, so this is definitely something to consider when making your decision.
Leaving the EU takes time
Theresa May announced plans to invoke Article 50 by no later than March 2017, but following that, Britain has two years to establish the terms and conditions of leaving. That said, Article 50 has never been used before, so the process could stand to become tricky in unexpected places. In short, this means that any impact on the housing market isn’t likely to be a knee-jerk, unanticipated crash, as change is expected to happen over time. This should give you some space to re-evaluate your options and make the best decision when deciding on what to do with your post-Brexit property plans.
FJP Investment is a team of investment specialists sourcing a wide range of investment opportunities both in the UK and overseas. Products include the recently launched property investment bond from Empire Property Holdings.