There is so much news about Brexit since June 23rd. Bad, good, uncertainty and delight!
It certainly is a time of uncertainty and change, but change is sometimes a good thing, if you’re willing to adapt and act on that change.
That change and fear and uncertainty will certainly have an impact on our property prices and on the economy. That is obvious when you look at the Euro and Dollar rate since Brexit!
But as Warren Buffett says; “Be Fearful when others are greedy and greedy when others are fearful”.
Property prices will probably go down following Brexit and this could be a good thing for a property investor. If your rental properties have a positive cash flow and you are in it for the long term you could pick up some bargains. Buy to Let is a long term investment, it’s not a get rich quick scheme!
Some properties will be available at BMV ‘below market value’, so you’ll get a discount on the current market value.
Halifax released their HPI for June today and this shows that prices are still rising but very slowly. This shows that the UK property market is still fundamentally strong. We still have a shortage of new houses being built, we live on an Island and we have a growing population. People will always need a roof over their head.
Martin Ellis, Halifax housing economist, said: “There is evidence that the underlying pace of house growth may be easing. House prices in the three months to June were 1.2% higher than in the previous quarter; down from 1.5% in May. The annual rate of growth fell from 9.2% in May to 8.4%; the lowest since July 2015. “House prices continue to increase, albeit at a slower rate, but this precedes the EU referendum result, therefore it is far too early to determine any impact since.”
Rob Weaver, Director of Investments at property crowdfunding platform Property Partner, comments:
“During periods of volatility in the stock and currency markets, investors tend to prefer assets which can provide a reliable income, combined with lower risk to preserve their wealth. For investors, residential property offers both of these attributes”
“Historically, residential property has been the best performing and lowest risk of all the major asset classes. Since 1973, through oil shocks, recessions, dotcom bubbles and the global financial crisis, the UK residential market has seen no five-year period with negative total returns.”
House prices recorded a “surprise” rise in June, says Property Wire, despite the UK voting to leave the European Union.
According to the latest Halifax house price index, the average property rose 1.3 per cent to a new record of close to £216,823 between May and June, an “unexpected” increase that was twice the rate of monthly growth between April and May.
Interest Rates
Since 2009, interest rates have been at 0.5% and lots of people have become accustomed to those sorts of levels. So what if interest rates rise? Interest rates in the 1986/88 property boom were on average 9.25%, the 1990’s they were on average around 6.5% and uber-boom years (when UK property values were rising by 20% a year for three or four straight years across the UK) .. 4.5%. Many of you reading this who are in their 50’s and older will remember interest rates at 15%.
But interest rates probably won’t rise that much anyway. As Mark Carney (Chief of the Bank of England) knows, raising interest rates causes deflation – which is the last thing the British Economy needs at the moment!
Of course there are many challenges ahead as we are now in unchartered territory. But if we can prepare, gain knowledge and adapt to this change the future could look very bright!
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