Are You Ready For the Brexit Property Boom?

Are you ready for the Brexit property boom? Many property experts believe that there is likely to be a Brexit property boom in house prices from next year. This blog reveals 6 compelling factors suggesting a post-Brexit property price boom may be a near certainty…

The 6 key factors pointing to a property boom post-Brexit are:

1 – Pent-up London demand

2 – The ripple effect

3 – The “new” ripple effect

4 – Political factors

5 – The return of overseas investors

6-  The 18 Year Property Cycle

1 –  Pent-up London demand

With a Brexit deal finally in sight, there is now every reason to expect years of uncertainty and pent-up demand in the capital to lead to a boom in property prices, from next year.

Quite how strong the growth will be is difficult to predict.

There are some factors that could reduce the impact of the price boom:

  • The 3% stamp duty for buy-to-let landlords and second homeowners is likely to suppress price growth.
  • Yields for rental properties are very low and that may put off many would-be landlords from buying.
  • Much will depend on interest rates – whether they remain low, or begin to rise – since they are a major determinant of house prices.

However, pent up demand is widely expected to be so great, a sharp uplift in prices seems highly likely.

Parts of central London – especially prime locations – have suffered losses in excess of 20% since 2015. Therefore, these areas are likely to bounce back first and strongest, even though restricted by prohibitive stamp duty rates.

The rest of the capital is likely to follow.

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2 – The ripple effect

A key feature of the property market is the ripple effect – price growth in a prime location inevitably fans out to surrounding areas, eventually spreading nationwide.

The history of the UK property market is that wherever London leads, the rest of the country follows…eventually.

The anticipated price growth in the prime parts of London is expected to ripple out to surrounding locations and boroughs as the recovery grows.

In time the recovery will spread out to the South East, and other areas of the south and west,  which have seen modest if any growth in the last two or three years.

Eventually, the whole country will benefit.

At the current stage of the property market in England, London is one of just two areas where property prices are falling.

CHANGE IN HOUSE PRICES IN ENGLAND IN THE YEAR TO AUGUST 2019

REGION % CHANGE
SOUTH WEST 0.9
SOUTH EAST -0.6
LONDON -1.4
EAST 0.1
WEST MIDLANDS 2.4
EAST MIDLANDS 2.6
YORKSHIRE & HUMBERSIDE 1
NORTH WEST 3.1
NORTH EAST 3.3

Source: Office for National Statistics (ONS)

You can find more detailed information about UK house prices as at August 2019 (the most recent month currently available) by reading: UK House Price Index: August 2019

Here are some ways you can further boost the value of your home in a Brexit property boom:

40 ways to add value to a home (increase the price of your home by adding value)
Always add value before you sell (3 key reasons to add value before selling)

3 – The “new” ripple effect

The  property market is not behaving the same way across the entire country. That begs the question whether the traditional concept of the ripple effect is still relevant.

While London prices have been falling slightly for a couple of years, in the North and the Midlands they have been performing fairly well, increasing by mid-single digit figures each year by in large.

Perhaps the best approach is to think in terms of a “new” ripple effect.

In the past, the whole country was typically in a downturn at the same time. The upturn would start in London and then spread to the rest of the country.

In the last few years, London and the South East have seen falling prices as the rest of the country, generally, has seen growth.

There is, as a consequence, doubt as to how the ripple effect will pan out this time around – as there seems to have been an uncoupling of London and the South East and the rest of the country.

However, on closer examination, not a great deal seems to have changed in real terms. There is nothing to suggest the uncoupling is permanent.

The ripple effect seems different but its impact seems likely to be same as ever

The ripple effect seems likely to run its normal course. However, this time around all parts of the country will not be starting from the same position.

As London and South East prices increase, both buyers and investors are likely to pour into the market, pushing up demand and prices.

Many investors now operating in the North and Midlands are likely to head South, to benefit from its traditional reward of high capital growth.

That in turn, could see prices in the North and Midlands cooling, perhaps even faster than they have done in the last year or so.

In the expected boom, prices in the whole country are likely to go up – but with London and the South probably performing better than the Midlands and the North.

If you are a property investor, now is a good time to consider your present and future investment locations.

If, for instance you are investing in the North alone, should you continue to put all your eggs in the northern property basket, or should you be looking to diversify by looking further south?

Rental returns may be better in the North but, as any experienced property investor will tell you, rent doesn’t make you rich. It is the capital growth of house prices that does that.

The North and Midlands can be expected to perform less well as prices in London and the South increase.

In time, aggressive growth in London and the South is likely to be mirrored elsewhere – with the whole country eventually returning to the same point in the cycle once again.

london-336427-1

4 – Political Factors may lead to a Brexit property boom

Notwithstanding what the doom-mongers would have us believe, political factors point to a strong economy and property market post-Brexit.

Whichever political party is in charge, it is likely to do all in its power to maintain a strong economy with high levels of employment and low-interest rates. These are factors which traditionally support a strong property market.

There may be new initiatives to boost the number of first-time buyers, or existing measures could be extended.

Generally, there is every reason to expect expansionist government policies for several years after Brexit.

Further, the Conservatives seem willing to listen to the property sector on the damaging impact of stamp duty.

Because of its high property prices, London is particularly badly affected by stamp duty. Any favourable change in the rates of the duty or how it is applied could have a sudden and massive impact on house prices in the capital.  That could push up prices to levels where the politicians start to worry again.

Overall, there is undoubtedly huge pent up demand in the capital. Accordingly, it would not be surprising to see double-digit growth there over the next two years.

To find out how to raise funds to benefit from the Brexit property boom, read the following blogs:

Raising funds by re-mortgaging (learn the ins and outs of re-mortgaging)
Flipping property (find out how to buy and sell a property quickly, for a profit)
Buy refurbish and refinance (learn how to cash in on a property by refurbishing it)

5 – The return of overseas investors may lead to a Brexit property boom

If Brexit has the expected impact of lowering the value of the pound, that could make UK real estate relatively inexpensive and highly attractive to overseas investors.

Many such investors turned their back on the UK after the Brexit referendum, and are likely to return in large numbers. That is especially likely if there is a reduction in the burden of stamp duty.

The simple fact is that the UK needs foreign investment . Therefore, it would not be surprising to see the government make it easier for overseas investors to invest in the UK property market.

London is expected to benefit most from any rise in overseas interest. That is because foreign investors are particularly keen to invest in London – given its history of spectacular capital growth,

That, in turn, is likely to fuel the recovery of property prices in prime central London districts. Such a recovery can then be expected to ripple out to other parts of the capital, and the country as a whole.

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6 – The 18 Year Property Cycle

Strange as it may seem, the theory of the “18 Year Property Cycle” also seems to support the idea that Brexit, far from leading to a house price meltdown, is likely to lead to significant price growth.

The basic theory behind the 18 Year Property Cycle, which is backed up by convincing data, is that property prices tend to crash roughly every 18 years.

The last crash was in 2008 and therefore the next crash can be expected sometime around 2026, or thereabouts.

Each crash is typically recognised by a mid-cycle wobble, when prices trend downwards, followed by a period of aggressive growth, eventually leading to a crash.

The current market conditions, pretty much nationwide, fit the description of a mid-cycle wobble. In London and the South East prices have generally been falling for a couple of years now.

Elsewhere, price increases are weakening in most locations, after several years of good growth.

The anticipated post-Brexit boom seems likely to end up being the period of aggressive growth which eventually topples over into a price crash.

Of course, the 18 Year Property Cycle is not scientific or certain. However, if previous history is anything to go by, it seems that the cycle and the likely property market post-Brexit are on the same page.

Even if Brexit leads to a further contraction of property prices, the 18 Year Property Cycle suggests that would only be short term – a year or two at the most – followed by the period of aggressive growth, from around 2022 onward.

If you want to know how to profit from the impending property boom by having a millionaire mindset, read:

Think like a property millionaire (the fundamentals of a millionaire mindset)

Conclusion

After all the dire warnings about Brexit, there is now every reason to believe that the outcome will not be as bad as expected. Indeed, it could be a great deal better.

The indicators are that the property market will benefit from a boom, if not immediately, within the next couple of years.

If you are planning to buy or sell a property in the near future, a home or an investment property, you should take stock of the situation now.

How might a boom affect you? In a good way or a bad way? What can you do to make sure that you benefit or are not adversely affected?

Consider and assess what are your best moves now, before the boom. Speak to experts and professionals. Work out what is in your best interests, and take action accordingly.

Do you agree that there will be a post-Brexit property boom? Perhaps you think that is an over-optimistic position and we will experience a bust instead. I would be really interested in your views. Please leave a comment below.   

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Dalton Barrett
Rebel Property Coach

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