THE PROPERTY MARKET AFTER BREXIT
Should I buy now or hold off until after Brexit? Will house prices will fall further? Simon Male, Partner Agent at Power Bespoke answers all the property questions on your lips…
Personally, I would just carry on as normal as every customer we’ve been helping to sell or to buy seem to be getting the outcomes they had hoped for. Even though right now Brexit is on hold for a few more months, it seems like we have not gone anywhere for years now. We have seen an increase in people wanting to put their home on the market and we’ve just had our busiest Saturday of the year for viewings post-Easter. I don’t think people can wait any longer to see what eventually happens, as we all have our own lives to get on with.
Nationwide property price performance has varied massively since the referendum two and a half years ago. London and the south east, which once drove house price growth, have stagnated, while some areas such as Wales and Northern Ireland have experienced year-on-year increases of more than 5%.
Bloomberg says the Brexit-inspired decline in London’s property values has yet to cause any serious ripples in other areas of the UK. “While price-growth and activity may be slowing amid the uncertainty, almost every other major urban area in the country is still experiencing a rising market,” says the financial news service. “It’s a national divide that’s all too apparent to real estate agents in northern England who aren’t too worried about the UK’s departure from the European Union.”
Wages in the UK are finally growing at a faster rate than house price inflation as the job market hangs in there despite the “Brexit Gloom”… Who would have thought!
This will generally benefit those who live in areas with a better income to living costs ratio, but not so much down here by the South coast.
The Office for National Statistics said house prices in the UK rose by an average of 0.6% in the year to February, the lowest rate of growth since September 2012, and down from 1.7% in January. The slowdown was mainly due to the price of an average London home falling by 3.8% over the year, the steepest drop since mid-2009, in the depths of the last recession.
Do we all honestly think that Brexit is going to affect the property market as much as the financial crash in 2008? I just can’t see it. They would never let it happen, as the property market drives too many factors. Property prices contribute to our GDP figures (how we measure growth), so once away from EU they will want to show we can hold our own, keeping the property market strong or looking strong from the outside. I do, however, believe they will have to re-look at the recent measures that were designed to slow the market down, (buy to let tax relief changes which is a gradual change over the coming years plus second home stamp duty).
UK house prices performed better than expected in March as supply continues to outweigh uncertainty over Brexit. According to figures from Halifax, the average price of a house in the UK dropped to £233,181, although still 2.6% higher in the first three months of the year compared with the same period in 2018.
Brexit should be conducted like buying/selling your home. There’s going to be a LOT of meetings and a LOT of talking.
The market is levelling out to where the prices should be, in some people’s eyes. Houses willalways sell if priced correctly. Agreeably there is still not enough urgency in the market and buyers are generally quiet, although we are seeing it pick up, as long as vendors are listening to the agents rather than spoon feeding them the price that they insist their house is worth. That’s not to say agents are not responsible for over valuing. In fact agents over-valuing houses costs the UK in the region of £5billion per annum through lost, potential revenue. This was published in an article by Which.
So how do you know who’s telling you the truth? People generally get three agents out and go for the middle price, unless the agent quoting the highest price is incredibly zealous and believable then the likely outcome is he will win your business. Agents know this and the large corporate agents are actually trained, to over value, to win your business, and then sign you into a long contract where they can then spend time telling you “You’ve got to reduce – I told you were testing the market at that price.” This tends to leave sellers feeling mislead as they then have to realign their expectations and re-do their sums.
Be shrewd and challenge everything an agent tells you. If they tell you your house is worth £1,000,000 make them prove it to you. After all, if you get the price more than 5% wrong, it could end up costing you thousands more when you end up reducing. All buyers care about is “why has that been on the market so long?” Do not get caught up with FOR SALE prices locally. What you should be caring about are the SOLD prices. A good agent will know.
There’s an old cliché ‘A house is worth what someone is prepared to pay for it’. That may be true to a point, but if the house sells for more than it’s worth, they have a tendency to get down valued by the surveyor. I have a different saying… ‘A house is worth what a surveyor will let it go through for’. They will perform a forensic desktop analysis of SOLD prices and even £ per square foot after visiting your house. They will call other estate agents to find out what the house that is under offer on the next road is going for. So, aiming for the sky on price isn’t always wise – especially in this market.
Don’t worry, there are now great tools at your disposal. www.getagent.co.ukis a great website which compares Rightmove to the land registry and shows you how much, on average, that specific agent gets against their asking prices. So if one agent is telling you your house is worth £500,000 and generally gets 99% of asking price, it is more likely he is the most accurate compared to someone telling you your house is worth £525,000 and gets on average 92% of asking price. It also tells you how long on average it takes them to sell – 12 or 25 weeks.
If you email us, we will happily send you our “16 questions to ask an estate agent” regardless of whether we cover your area or not as we’re happy to help improve this industry. Questions like “What is your average % achieved of the original asking price”or “What is your viewing to offer ratio” are key questions most members of the public neglect to ask but are so crucial.
We feel that the market has bottomed out. It has already fallen but it takes a while for the media and the house price index to catch up with reality. The media then go and report a fall which happened months ago and it makes everyone weary again.
A No Deal Brexit, is the one that concerns investors and market experts about the potential consequences, given it remains the default position if an agreement cannot be reached by the new deadline of 31 October.
As of last September, the Bank Of England governor Mark Carney predicted a no-deal Brexit could, at worst, see a 35% drop in house prices. I don’t see it. Yes the ones that have been put on the market for a far greater value than what they are worth may see a drop like that. But with interest rates still low, why not buy now and beat the rush of punters who are waiting for the market to drop? People will always need to move, job relocation, lifestyle change, eventually saved enough money after renting for many, many years.
A recent survey by the Centre for Economics and Business Research (CEBR) suggested homes in cities and major towns were on the market for 102 days on average before being sold or put under offer – that was six days longer than in 2017.The expectation among commentators is that there will be more of the same in 2019. The market will keep moving, but slowly. Properties will go on the market, partly the result of death, debt and divorce. People will still have to move for work or for schools, or because they are attracted by a discount. Potential buyers might struggle to get a new mortgage, owing to strict lending criteria, and potential movers might choose to renovate or extend their homes instead of relocating.
All of those factors, and more, mean most of the commentators we asked are predicting relatively little change in house prices in 2019.
“In short, the market will continue to tread water,” said Andrew Burrell, of Capital Economics.
Experts’ 2020 UK house price predictions
§ Richard Donnell, property market analysts Hometrack: 3% rise
§ Andrew Montlake, mortgage broker Coreco: 1% to 2% rise
§ Henry Pryor, housing market commentator: 5% fall
§ Miles Shipside, property portal Rightmove: no change
§ Andrew Burrell, Capital Economics: 1% rise
§ Simon Rubinsohn, Royal Institution of Chartered Surveyors: no change
§ Russell Galley, mortgage lender the Halifax: 2% to 4% rise
These predictions show an average for UK house prices, but each of the commentators point out that the picture can vary significantly in different parts of the country. It can also vary in different neighbourhoods of the same town. This is all as long as Banks don’t tighten the reins anymore and make it harder for potential buyers to get a mortgage.
The beauty of the UK property market is that everyone says something different. Would you bet your mortgage or if you are mortgage-free your home on it? I certainly wouldn’t. There will be certain areas which drop and there will be certain areas that rise and areas that stay as they are. Same as always. Just by different percentages.
The effect of Brexit on the property market has already happened and this could be as bad as it gets. However the next few months we will be saying, hearing, having discussions about the same things we all were 10 months ago about the property market.
Every vendor and buyer is asking agents up and down the country “What do you think will happen due to Brexit?” Personally I wouldn’t wait and see what happens. I would just carry on as normal and negotiate the best price possible. No different to any other time in the UK property market.
Do not wait for it to rise. When things rise they tend to come back with a vengeance and you won’t notice the prices going up as the layman. You will only notice when the prices start edging up on Rightmove and going under offer within a week. By then, it’s too late to get a fair deal; you’ll be one of 20 people through the door on open days and trying to outbid 5 people you know nothing about!
I like markets like this. This is when I would move personally… you can make calculated, risk assessed decisions – not snap, rushed ones. If your house is worth less now, so is the one you want to buy! You will not be losing out.
Partner Agent Power Bespoke