Buy To Let
How will Brexit affect the UK property market?
There will be a lot of speculation around the result of the referendum and with talks of a potential “rematch” already gaining momentum, we may not have seen the last of the Referendum yet.
However, as with any change and uncertainty it is about keeping calm heads and not believing all the wild predictions that have inevitably arisen.
Much of the speculation is inevitably focused on the housing market and whether or not we will now see a sudden or a prolonged period of price falls, which would no doubt delight some first time buyers.
The reality is that we are in uncharted waters and no-one really knows what will ultimately happen next. All we do know is that markets do not like uncertainty and while in the long-term we may ultimately be in a better place, the short-term uncertainty could well have a marked effect on interest rates, the housing market and the economy in general.
For those who think an exit may “cure” the housing crisis this again is far too simplistic. While we may see an easing of prices the underlying fundamentals of people needing a home and the current lack of supply remain.
Yes, we could see some owners looking to sell quickly, especially some landlords, which may contribute further to prices weakening, but for many the long-term prospects for price growth still look strong.
The most affected market will no doubt be Prime Central London especially properties above the £2m level which has been slow for some time now.
If sterling continues to weaken however, we may well see foreign investors looking to take advantage of this market once more.
Eyes will be focused on the Bank of England and its reaction where interest rates are concerned will play a key role. In the short-term we could well see an early Base Rate cut which would mean that mortgage products should continue at their current low rates and there is much for borrowers to take advantage of.
Also, it is important for buyers to remember why they are purchasing a property; in most cases it is a home and should not be looked at as a short-term investment. The underlying fundamental reasons why people buy property; to move out of home, start a family, move to a school catchment area etc will not change and the current lack of supply remains.
The real issue could be how much it will effect lenders lines of credit, with some predicting the availability of funding lines could contract, meaning some lenders having to pull back from lending a touch.
That said, banks are however much better capitalised and having repaired their balance sheets over the past few years will still be in the business of looking to lend, so for the most part there is no reason to think that it will not be business as usual. The Bank of England has also been very clear that it will do whatever it takes to assist where necessary.
There is also no reason to assume that banks will suddenly pull back on their recent improvements to lend to a more diverse range of borrowers as they still need to attract more business through the doors.
One issue to watch is how valuers react as the uncertainty over house prices in the short-term begins to bite and we may see more down-valuations coming through.
When all is said and done however, we may look back at this period and see it as a fantastic opportunity for buyers to take advantage of a slight softening of prices and some highly attractive mortgage rates.
While the short-term road may be rocky, there is no reason to believe that the future will not be bright.