THE BREXIT HOUSE PRICE BOUNCE

There is growing talk of “a Brexit house price bounce” – a jump in house prices, starting in London, once the outcome of Brexit is known. Should you buy before or after the bounce?

Will there actually be a bounce?

The bounce is anticipated after two years of house price falls in London as a whole – down 0.5% in 2017 and down 0.8% in 2018.

Of course talk of a Brexit bounce is ultimately speculation – given the ongoing uncertainty as to how exactly Brexit will conclude.

However, there are a number of factors which suggest a bounce is well within the realms of possibility…

Why a bounce is possible

In London, where most property trends seem to start, there is clearly strong pent up demand, waiting to be released. Land Registry figures for the last quarter in 2018 showed that buyers were in short supply and transaction numbers were very low.

Observers are expecting a similar trend for the first quarter of 2019.

People want to buy and sell but economic and political uncertainty is putting them off. The stakes are high. The Brexit process could lead to a General  Election and a new Labour government led by Jeremy Corbyn, with a major policy shift for the economy.

There is currently talk of the Brexit withdrawal date being pushed back from the 29th March 2019 by extending the timetable using Article 50 of the Lisbon Treaty.

Therefore the uncertainty could continue months after the 29th March.

Whatever the position, Brexit clarity is likely at some point this year and that could be a boost for house prices – even if it does not turn out to be long term.

Of course there is no certainty of a recovery in house prices in the short to medium term. There could be the very opposite.  A “disorderly Brexit”, in a worst case scenario, could lead to a 35% fall in prices over three years as warned last year by Governor of the Bank of England Mark Carney. 

Many observers think so severe a fall is unthinkable in a climate of low interest rates and year after year failure to reach the government’s new homes target of 300,000 new homes per year.

However, most commentators seem to accept that a major downturn in the economy post-Brexit could bring down house prices across the country.

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How should you respond?

So how should you respond in the current situation?

If buying is on your agenda, is it best to buy now or should you wait until the position becomes clearer?

The difficulty of course is the behaviour of property prices…you can never be sure whether they are going to fall or rise.

If Brexit is put back and prices are likely to fall significantly further before any bounce, buying now would not be the best move.

If we are already at the bottom of the market, buying now would be smart. 

However, because of the uncertainty in predicting the movement of house prices, perhaps the best approach is to lay off trying to time or predict the market and simply buy when you want or need to buy and can afford to do so.

Good time to buy

Whatever the position, now is as good a time as any to buy if you are looking to buy (as a home or as an investment) with the intention of holding for the long term, 10 to 20 years.

In that timescale, any error in your timing should correct itself – leaving you with the healthy capital growth most homeowners enjoy as a result of long-term property ownership.

Far from worrying whether prices are going to go up or down, your concern should be whether you can safely afford to buy without putting yourself under financial pressure which, given a significant upward swing in interest rates, would see you at risk of debt or even repossession.

Look to lessen the financial burdens and risks by purchasing with another person where possible.

Use the current uncertainty to drive down the asking price and bag yourself a bargain.

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Focus on the financial aspects of buying

If there is an opportunity to benefit from the government’s Help to Buy initiatives (such as an equity loan, shared ownership or a Help to Buy ISA), it makes financial sense to do so – since government is unlikely to be able to fund these benefits indefinitely.

It is good practice to “stress test” your ability to afford the mortgage you will need.

Calculate whether you will be able to afford your mortgage and other essential expenditure if interest rates were to increase – say by 2% over the next 3 years.

If you are in an expensive part of the country and can’t afford to buy locally, you may want to continue renting and buy elsewhere using rentvesting as a strategy.

If a deposit is your biggest hurdle look at ways to raise a quick house deposit.

Conclusion

In the end it is not about predicting a Brexit boom or bust and smartly taking advantage.

It is about realising the fact that property is at its kindest when seen and owned as a long-term investment.

If you buy as soon as you can afford to buy – fearlessly exploring all the options – and hold for a decade or two – you are likely to benefit from substantial capital growth – gaining enviable wealth, irrespective of short term market turbulence.

You may also find the following blogs of interest:

Cut spending – grow deposit (raise a deposit fast by cutting your spending)
Boost income – grow deposit (raise a deposit fast by increasing your income)
Buying a property fast (wacky and wicked ways to raise a deposit)
Raising a deposit (14 common ways to bag a deposit with ease)
Mum & dad to the rescue (ways parents/grandparents can help you to buy)
Government help to buy (government financial help for first time buyers)
More help from the government (right to buy, right to acquire and shared ownership)
Will you be too late? (why you may miss the government’s home purchase freebies)

What do you think is going to happen to house prices in 2019? Please leave your questions, observation or comments below.

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Dalton Barrett
Rebel Property Coach

Please follow me on Twitter @Dalton1London
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My website is: www.rebelpropertycoach.com

 

 


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5 comments

  1. Bottom line, while all the speculation is interesting and everyone wants to bag a bargain, you should buy when you’re in a position to do so and not wait on a situation which may or may not occur.

  2. Another good article. Since you’re asking for an opinion…. It doesn’t matter what prices are doing if you want to do up a property and sell it. It’s always possible to buy something dilapidated that needs doing up and then make money by bringing it up to market price IF you can do some of the work yourself, you flip it quickly before market forces change things and you choose an area where there is demand e.g. near a station or good schools. The problems arise if you buy at the market price for the area and expect to make a profit on prices rising through demand in a short time span.

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