With Brexit currently dominating the headlines, many are talking and writing about the potential impact on the property market. In areas such as Prime Central London, where some property prices have been falling since 2014, Brexit, together with tax increases, has meant prices have fallen further. For example, the average property price in September 2018 for Hammersmith and Fulham is down 4.6% year on year, but down by 7.2% versus August 2015. (Source: Land Registry)
While Brexit itself might not directly affect the domestic marketplace, it has reduced people’s confidence when it comes to making major financial decisions. So, together with other negative economic news we’ve had this year - including some job losses and pressures on high street businesses - Brexit has given people a reason to put off moving until things have settled down or are at least clearer.
At the same time, many don’t have a choice about whether and when to buy and sell. People typically move because of a major change in life circumstances, including:
- Having a baby
- Getting married or divorced
- Being in debt
- Relocating for work or school catchment areas
- Following bereavement.
For those who have to move, this may be a less-than-ideal time to do it. However, for investors, economic uncertainty can offer great opportunities to secure discounted deals that don’t tend to be available during more settled times - so now could be a good time for those who have capital to invest to secure a bargain.
The first thing to be aware of is how the market differs across the UK and how it is expected to change further. Some areas have seen increases in prices and rises in rents, some a slight drop since the credit crunch, while others have hardly seen any change.
So, if you are thinking of buying, selling, letting or investing in the near future, you need to understand how your property’s value has changed since you bought it (if you are already a home owner) and what is currently happening within your local market. Is it active, with lots of properties selling and new ones for sale, or slow, with very few sales taking place?
The second thing to think about is how long you intend to stay in the property you are looking to move to. This is crucial, as the longer you plan to live there, the more likely you are to see fluctuations in prices, which means buying a home you love can be more important than short-term financial considerations.
Finally, if you know exactly what you want to buy – especially if it is something unique - ask yourself whether that property is likely to be available in a year’s time. If not, you may choose to buy now, regardless of other economic factors.
Take a look at our property predictions for 2020 to understand what the housing market could look like next year!
How homeownership can be made more affordable in 2019
Shared Ownership – where you purchase part of a property and pay rent for the remainder - is becoming a more popular and accessible
route to owning a home. This is normally limited to Housing Association properties and new build homes, but Romans is now able to arrange this on resale properties, in an effort to make home ownership an option for as many people as possible.
Help to Buy - If you are struggling to afford a property in the South East, it is also worth looking at what other government support you could secure. That includes offers such as the Help to Buy and Lifetime ISAs, which can boost your deposit by 25%, and free five-year loans on new builds via Help to Buy.
If you are looking to trade up or down, check what your property is worth, so you know how much equity you have to put towards your next purchase. It is likely you will have enough equity to move and, if you are trading down, even to release funds for extra pension income or to retire early. While prices are not expected to continue to rise by much, your efforts should be focused on finding the property that’s right for you for the longer term, rather than being overly concerned about the market.
Property Predictions for Investors
For investors, there may be some bargains around as the market slows down. But with no natural capital growth expected, it is worth considering leveraging your cash via a mortgage to maximise your returns.
Rental Market Forecast
From a rental perspective, OBR forecasts in the 2018 budget suggested wage growth should be higher than inflation over the next few years. As rents are typically tied to wage growth, this is good news for landlords, who could see inflation-beating rental growth as well – something that hasn’t been easy during the credit crunch, as you can see from the chart below. (add chart from South West)
If you are planning on renting, the most important thing is to secure a property as soon as possible and if you are already a tenant, try to stay in your current home. This is because stock levels are expected to reduce while landlords work out whether to stay in the market or sell – mainly due to government tax rises - and this could push rental prices up.