Brexit's Impact to London's Property Market, Ultimate Crisis or Myth?
Updated: Apr 11, 2019
With parliament at loggerheads about the future of the UK and its alliance with the European Union, a cloud of uncertainty has been cast over the stability of the housing market for the next few years.
The doubt has already divided property experts with Mark Carney, the Bank's Governor, predicting a drastic 30% drop in house prices if we end up with no deal. But should this stop you from becoming a buy-to-let landlord? There are a few outcomes to consider:
Possible decrease in House price
This could be either a blessing or a curse for those seeking to create a property portfolio.
According to Homes&Property, in February 2019 London’s house prices dropped by £6,625 - a decrease in value by 1.1%.
For property enthusiasts, this is worrying as for the first quarter of the year the market typically experiences a boost.
Within the last year, estate agents have noted the number of house sales declined by 9.6%. This observation is parallel to that of Rightmove. A spokesman for the property website has expressed concern over the lack of a Spring revival across the UK.
David Blake, a mortgage adviser for Which?, said: “Recent price drops in some regions mean that it’s becoming more of a buyers’ market, so you might be able to get a good deal."
For those intending to buying new properties, the price drop may mean you’ll get more bang for your buck. In August 2018, according to ONS, the average house price was £232,797, by December this dropped to £230,776.
Sounds good right? It is for buyers but not such good news for those hoping to make a profit from selling their estates.
Homeowners may be less likely to sell
While house prices have dropped since the EU referendum in 2016, the uncertainty surrounding post-Brexit has been linked to the drop in transactions of London’s high-end homes.
According to The Financial Times has reported property-buyers in recent years were mainly made up of those that bought out of necessity. However, the purchasers in question would now be benefiting from “good discounts”.
Kate Faulkner, housing expert and founder of propertychecklists.co.uk told Which? that landlord demand had dropped and she doesn’t predict any further drops in the buy-to-let sector. She went on to advise that new landlords planning to invest after Brexit need to be savvy with their business plans and long-term goals.
Lenders may be more cautious about rewarding mortgages
Tarrant Parsons, an economist at the Royal Institute of Chartered Surveyors, has warned it could be harder to get a mortgage in post-Brexit Britain. He told iNews: “Interest rates would likely be cut in a no-deal scenario, banks may be less willing to lend.”
However, to combat Brexit anxiety, a few UK mortgage lenders - including HSBC - have reduced their rates to encourage potential buyers to invest.
The Guardian reported HSBC cut its two-year fixed rate by 0.1% for a loan 95% of the value of the home. A five-year fixed rate was also down 0.1% to 2.29% on a home with a 90% loan to value.
One thing that is for sure is, Brexit brings a huge amount uncertainty for London’s property market, no-one knows for sure what the impact will be. However, Normette Homes can provide Landlords with the continued benefits of owning a property, without the uncertainty. Take a look at our service offering or contact us today for a free consultancy!
Normette Homes specialise in providing guaranteed rent and free management services.