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 14142 Dartford homeowners especially the 8638 of those Dartford
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.
Dartford Property
Values
Dartford 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 Dartford have risen by 2561.1%
(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 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 2012/3/4 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 pricier .. 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 Dartford landlords of the 4,701 Dartford buy to let landlords 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 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 Dartford property? It might have a short term
wobble… but in the long term - it’s safe as houses regardless.
