A Brexit House Price Crash?
We’re often asked for our opinion on what impact Brexit will have on house prices.
Although we love talking about the property market, it’s a struggle to give a clear-cut response.
The truth is that nobody – not even the so-called ‘experts’ – really knows!
You may remember that, before the referendum vote in 2016, leading economists and even the Bank of England predicted that house prices would fall.
But, as shown in the graph below, all the major price indices have been showing a different story.
Although there was a little bit of panic after the result, prices remained pretty flat.
There are also a number of other factors that demonstrate how the housing market is more resilient than many believe.
Firstly, since 2008, mortgage borrowers have benefitted from a low Bank of England Base Rate (BBR). After a drop to 0.25% to ‘cushion the blow’ from Brexit, they’ve since risen twice to 0.75%. Even so, mortgage rates from banks and building societies are still competitively priced. This, in turn, has fuelled a steady level of growth.
Secondly, there is a major undersupply of good quality housing coming on to the market. With every year that passes where housebuilding targets are not met, average prices grow as there are not enough homes to go around. Related to this, the complex planning system and rising building costs continue to drive down the number of new homes coming to market.
Thirdly, the government’s Help to Buy scheme has enabled over 450,000 first-time buyers to get on the housing ladder. Although this initiative has been criticised for not assisting the right type of people, it has certainly supported house price inflation across the country.
Of course, as positive as this all may sound, this certainly doesn’t mean the property prices will always go upwards.
Brexit Property Market Risks
The property market is often influenced by what’s happening in the wider economy. This is because housing costs usually take up a lot of what we earn. So when issues like falling wages or rising unemployment occur, the risks of a market downturn generally go up.
When it comes to Brexit, remember that it’s only once we leave the EU that the economic impacts will be felt. This perhaps explains why house prices didn’t shake as much after the vote.
Of course, opinions are always wide and varied…
Some are sure that Armageddon is just around the corner. At the opposite end of the spectrum, there are others that firmly believe the economy will shine brightly as a result of leaving.
Yet, with all the debates, extensions (now until October 2019) and the possibility of yet another General Election, most people these days are confused more than anything else!
The best case scenario for the housing market is that we leave the EU without any hitches. Key components of the economy, like trade and jobs, are not affected.
The country also eventually benefits from the extra money not being contributed to the EU budget. In turn, the house prices will grow steadily and the Conservative government’s plan to build more houses becomes a success.
So what’s the worst case scenario?
First, the value of the pound could drop – the usual consequence of which is inflation (i.e. prices go up). People have less disposable income and ‘batten down the hatches’. The Bank of England’s traditional response is to push up the Bank Base Rate (BBR). This would then filter into the mortgage market in the form of higher rates.
In turn, there will be fewer house buyers, those on variable or tracker rates will have higher costs every month and the affordability crisis worsens. Combine this with wider unemployment and falling incomes, and things could get messy.
Or perhaps it will be somewhere in between and house prices will broadly remain flat? At the current time, it would seem that this is more likely to be the case. There are some parts of the country that may grow – especially in the Midlands and North.
Brexit: Keep Calm and Carry On
If you’re struggling to sell at the moment, our advice is to stay calm, ignore all media-led hysteria and play close attention to the real facts.
The UK housing market works in cycles and – whilst it’s never easy to predict – some form of price correction will happen (Brexit or no Brexit).
The country has experienced house price crashes in the 1980s, 90s and in the late 2000s years ago after the credit crunch.
Every time, following a lull period, the market has recovered.
Many homeowners across the country have also gained equity in their homes. If you’re one of them, any potential downturn will not place you in a bad situation even if you do need to sell.
Where possible, despite the seemingly endless delays, you may choose to wait and see how things play out.
Remember that, if you end up selling up for lower than you originally expected, the rest of your local property market has probably dropped in value as well.
So you’ll pay a lower price for anything you buy as the whole of the market (not just your own house) is cheaper.
Think of it as a rising and falling tide on which all houses are floating together.
Selling Your House in a Brexit Era
One thing is for sure: people will always need a roof over their head. If you need to sell, you will!
Even if things slow down, there is still a market for buying and selling homes.
Below we’ve highlighted the three main channels, namely: an estate agency sale, using an auction house and selling directly to a quick buying company like Property Solvers…
Selling on the Open Market (Estate Agency Sale)
The most common way to sell a house and secure the best price. These days, the competition for your business is hot.
You may also be getting a little confused when deciding on whether to use an offline or offline agency.
Despite the extra costs, most people prefer the ‘personal touch’, i.e. dealing with an estate agent face-to-face. However, perhaps if you don’t mind being a little more proactive, doing everything over the internet and phone might work. There’s also the express estate agency option that looks to provide clients with the best of both worlds.
As you’re generally dealing with buyers looking at several other properties, the process can be slow (4-6 months).
Taken from our 101 tips to sell your house fast guide, below are some pointers that can help speed things up:
- Keep an eye out on local prices to make sure yours is in line with the market (see our house valuation guide for some free tools you can use);
- Once you understand what’s going on for yourself, be wary of the classic estate agent trick of promising an unrealistically high price to get your business;
- If you see more FOR SALE than SOLD signs, it’s usually a sign of a slowdown. You may need to adjust your price accordingly;
- Check the estate agent’s marketing plan and ensure your house will get good exposure;
- Make sure you have all your paperwork and sellers pack in order (including gas / electrical servicing documentation and building regulations certificates where necessary);
- Create a nice curb appeal and make sure your property is welcoming;
- See what else is on the market and work towards making your house stand out. Remember, you don’t have to spend a fortune!
Selling at Auction
These days, auctions are not just for people looking to offload problem properties.
People approach auctions when they’re not getting what they need from an open market sale. You’ll often find all sorts of buyers bidding on homes, especially given the growth of online auction platforms.
The main benefit for you as a seller is greater certainty.
Once the hammer falls, there is a legally binding exchange of contracts. If the buyer pulls out for whatever reason, they’ll lose their deposit and incur other fees and penalties.
From start to finish, you could also be looking at up to 3 months to get your property sold. This is because you usually need to give the auction house time to actively market your property and organise viewings / open days. Then, after the exchange (on the day of auction), you’ll usually have to wait another 28 days until completion.
Remember that selling fees with auction houses tend to be more expensive than estate agents. Make sure you read the small print and look out for ‘hidden extras’.
Sell House Fast Company
Relatively new in the property industry, quick house sale companies work with homeowners in search of a more efficient service.
The main advantage of using a quick buyer is that properties are bought for cash within timeframes as short as 7 days (although the typical sales time is 28 days). Most will also cover your legal fees. As the sale is direct, there is also no estate agency involvement and you can often access cash in advance.
Offers are generally lower than what you would get with an estate agent and around the same as with auction houses.
Going ahead with a sale will therefore largely depend on how urgently you need to complete. Although, make sure you watch out for the sell house fast scams.
Quick buying firms also buy the properties that buyers often do not want. They’ll happily take on properties with structural issues, serious damp, subsidence or complex legal questions.
A Property Solvers House Sale
Property Solvers has been set up since 2005 as a quick house buying company. We have bought a range of different properties across the UK.
Our clients are safe in the knowledge that we are a trusted and accredited house buyer.
As well as developing our own Code of Practice, we adhere to The Property Ombudsman and Trading Standards guidelines.
We are also registered with the National Association of Property Buyers, Trading Standards the Data Protection Authority and the UK government´s own money laundering regulations.
In 2018, we expanded to offer an express home sale service for clients that want a fast sale but do not want to accept a lower price.
Although the sale is not as secure as our quick cash sale, we work to get firm offers in place within 28 days.
Furthermore, unlike a growing number of agents, there are no tie-ins and no upfront fees. You really have nothing to lose by giving us a try!
Should you wish to discuss any aspects about the fast sale of your home, please contact us via 0800 044 3733 (freephone). Our lines are open 24 Hours, 7 days a week. Alternatively, fill your details in the contact box below or e-mail us at email@example.com.
We´re waiting to help and placing pressure on you to sell is not our style…