Friday, 21 October 2016

What is the impact of Brexit on the property market?


 Shortly after this countries decision to exit the EU we wrote in The West Briton about the mass hysteria surrounding the result and its potential impact on the property market locally.  We likened the response to the children storybook character ‘Chicken Lickin’ whose prediction was that the sky would fall in. Although the fallout of the decision to leave, won’t be realised from several months or possibly even years, one thing is for sure - the sky hasn’t fallen and is unlikely to do so either.

People have continued to breathe, have a pint, watch Strictly, go on holiday and god forbid even buy and rent houses.

There are conflicting forces at play in the housing market. The target of building at least 300,000 houses nationally has not been met with barely more than 200,000 houses being built in the last few years.

Mortgage interest rates are at their historical lowest and this has meant that there are some favourable lending deals. This should translate to creating a pent up demand for housing, particularly in Cornwall where there is significant inward migration. However the conflict is in the restriction on lending and 'tough' affordability rules brought in by the EU. More 'responsible' lending has translated into a more restrictive lending regime. This has meant that low income families will find it hard to get on the housing ladder. The irony is that many of these tenants will continue to pay as much in rent as they would with a mortgage!

What of the local property market?

With sterling  lower than it has been for a decade, there might be some refuge for overseas investors buying on these shores. Similarly for those considering the relative merit of investing in the county as opposed to buying a property in France or Spain, the poor exchange might make them think twice. However given the numbers of these investors the impact either way is hardly likely to be earth shattering locally.

Zoopla property statistics for the last three months in Cornwall indicate an average fall in house prices of 0.35% with very little regional variation. With average house prices across the county at £240,000, this is barely a £700 drop off for each sale.

What is perhaps more interesting is the tail off in the number of sales in the last quarter. Of the 8245 house sales in Cornwall in the last year, only 1095 or a paltry 13% of these sales have come in the last three months. In Truro there were 111 house sales and in Falmouth there were only 48 house sales! In the previous quarter (which were slow too), there were 210 and 118 sales respectively for Truro and Falmouth.

What do these statistic tell us? Aside from the fact that your shiny suited estate agent was probably asking his mates to stand him a pint at the bar, it indicates that confidence in the property market was dented but not hammered. It clearly indicates that people were holding back from buying properties both before the Brexit referendum and in the months after. However those buyers that did enter the market weren’t exactly bagging themselves a bargain as house prices retained parity.

The rental market raced away as it usually does in the Summer months. As a growing agency we experienced early mornings, late nights and a constant frustration that supply of good quality rentals continues to keep up with supply. Hence if you can’t sell your house and realise your asset this way, look to rent it. Rental returns remain strong and there are some decent quality tenants looking to find a home.

The next quarter will be interesting. I wonder who is going to win Strictly, will Ross Poldark ever smile and will my estate agent friends actually buy a pint?


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