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 like a stone 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 25,303 Crawley homeowners
especially the 15,839 of those Crawley homeowners with a mortgage?
The
Chancellor in 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.
Crawley Property
Values
Crawley
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.
Since the last In/Out
EU Referendum in June 1975
property values in
Crawley have risen by 2054.5%
(That isn’t
a typo) 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 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 2012/3/4 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 .. 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 (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.. 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)
than the one you are selling.
The Crawley landlords
of the 4,701 Crawley buy to let properties have nothing to fear neither,
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’, the country needs to build about 250,000 properties a
year to even stand still, and as 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 Crawley property? It might have a short term wobble… but in the
long term -it’s safe as houses regardless.
