It’s 5.50am as I start to
type this article and David Dimbleby has just announced the UK will be leaving
the EU as the final votes are counted. As most of the polls suggested a Remain
Vote, it came as a surprise to most people, including the City. The Pound has
dropped 6% this 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 Stoke
property market and in particular for the Landlords of the 14,176 properties in
the private rental sector
The Chancellor, during the
campaign, suggested property prices would drop by 18%. Using Treasury
estimates, their
method of calculating this was tenuous at best, but focused around the abrupt
and hasty increase in UK interest rates, which in turn would raise the cost of
mortgages, and therefore lower demand for property, causing a drop in property
prices.… and I would say, yes .. that will probably happen.
Stoke
Property Values
Stoke property values will probably drop in the coming 12
to 18 months – but by 18% - I am sorry I find that a little 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.
And
whilst property prices did drop nationally by 18.7% 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 10.14%
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 2012/13/14 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 .. 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. However, 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 pricer .. it will make British export
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%, 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
I suspect interest rates won’t rise that much anyway, as Mark Carney
(Governor 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.. because 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 Stoke-on-Trent landlords of the 14,176 Stoke buy to let properties have nothing to fear nor do the 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’, the country needs to build about 250,000 properties a year to
even stand still,
and as the the birth rate is increasing, 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
unchartered 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 Stoke-on-Trent property? It might have a short term wobble…
but in the long term -it’s safe as houses regardless.
