It has been over a week since David Dimbleby announced that the UK will be leaving the EU. As most of the polls suggested a Remain Vote, it came as a surprise to many people, including the City and the people of West Berkshire. The Pound dropped 6% the morning after the City Whiz kids got their predictions wrong and MP’s from the Remain camp are using words like “challenging times ahead”.
.. and now the vote has been made.. What next for the 10394 Newbury homeowners especially the 5641 of those Newbury homeowners with a mortgage?
The Chancellor in the campaign suggested property prices would drop and I would say it is still too early to call. However the pound is starting to recover, the Governor of The Bank of England, Mark Carney, has addressed the press with a very calm and confident statement. Mortgage availability is still good, banks still want to lend, interest rates are still at an all-time low and almost two weeks into a new era it seems as if for the Newbury homeowners, landlords and purchasers, life will continue…
Newbury Property Values
Newbury property values may drop in the coming 12 to 18 months – but by the 18% that the pre Brexit campaign suggested? – I am sorry but I find that a very pessimistic and believe that figure was rhetoric to get homeowners and landlords to vote in a particular way. But the UK property market is quite a monster.
Since the last In/Out EU Referendum in June 1975,Property values in Newbury have risen by 2167.2%
(That isn’t a typo) and whilst property prices did drop nationally between the peak of 2007 and bottom of the market in 2009, when one compares property values today in the country, compared to that all-time high of 2007, (the period before the financial crisis of the Credit Crunch of 2008/9).. they are still up 25% higher.
Another Credit Crunch?
And so, notwithstanding the Credit Crunch, the worst global economic outlook since the 1930s and the recession it brought us, a matter of a few years later, the Government were panicking in 2012/3/4 that the housing market was a runaway train.
Now the same Credit Crunch doom-mongers and Sooth-Sayers that predicted soup kitchens in 2008/9 are predicting Brexit meltdown. Bad news sells newspapers. Stock markets may rise, stock markets may fall, yet the British public continued to buy property in 2009/10 and beyond. Aspiring first time buyers and buy-to-let landlords dusted themselves down, took a deep breath and carried on buying… because us Brit’s love our Bricks and Mortar and we need a roof over our head.
However, as mentioned previously, if the value of the pound drops, in the past UK Interest Rates have risen to reverse that drop. Remember, whilst a cheaper pound will make your pint of Sangria a little more expensive on your Spanish holiday this year and make your brand new BMW pricier. It will make British exports cheaper! Which is great for the economy.
Interest rates
… and what of 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, end of the world? Interest rates in the 1986/88 property boom were on average 9.25%,in the 1990’s they were on average around 6.5% and in the 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 I suspect interest rates 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. In fact they have been printing money (aka Quantitative Easing) for the last few years (which causes inflation) to the tune of £375bn a month. A bit of inflation because the pound has slipped on the money markets (not too much mind you) might be a good thing?
Because whilst property values might drop in the country, they will bounce back. It’s only a paper loss, as it only becomes real if you sell. And if you have to sell, again as most people move up market when they sell, whilst your property might have dropped by 5% or 10%, the one you want to buy would have dropped by the same 5% to 10%, and here is the best part – (and work your sums out) you would actually be better off because the more expensive property you would be purchasing would have come down in value (in actual pound notes)more than the one you are selling.
The Newbury landlords of the 4,701 Newbury buy-to-let properties have nothing to fear either, nor do the 11,612 tenants living in their properties.
Buy-to-let is a long term investment.
I think there might even be some buy-to-let bargains in the coming months as some people, irrespective of evidence, panic. Even if we pull up the drawbridge at Dover and immigration stopped today, the British population will still increase at a rate that will exceed the current property building level. Britain is building 139,600 properties a year, but needs, according to the eminent ‘Barker Review of Housing Supply Report’, about 250,000 properties a year to even stand still. As the birth rate is increasing, and the population is living longer and just under a quarter of all UK households now are occupied by a single person, demand is only going up whilst supply is stifled. Greater demand than supply equals higher prices. That is definitely a fact.
So, what will happen next?
Well, there are many challenges ahead. The country has spoken and we are now in uncharted territory – but we have been through a couple of World Wars, an Oil Crisis, Black Monday, Black Wednesday, 15% interest rates and a Credit Crunch, and we survived! And the value of your Newbury property? It might have a short term wobble, but in the long term -it’s safe as houses regardless
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