Whether you wanted to be in or out, when waking up Friday morning it was a surprise to much of the nation that we voted to exit the EU. Despite the EU second referendum petition reaching nearly four million signatures, David Cameron confirmed that it will not happen. There have also been calls for a second look at the referendum from Richard Branson.
Britain leaving the EU is the decision that has been taken and I personally believe that backtracking now makes no sense whatsoever. Whether you are happy or not, we must unite and follow through to make sure the interests of the United Kingdom are protected during exit negotiations.
Pre-vote there was the prediction that house prices would drop by 18% after a Brexit. This was based on rising interest rates, but there have been conflicting reports on whether interest rates will rise or not. Mark Carney, the governor of the Bank of England, has been loathe to raise interest rates during his tenure so I don’t expect him to begin now. I think we will some reduction in house prices but until we have house price index reports in the upcoming weeks it will be impossible to accurately predict how much prices will fall.
More than anything, what will cause house prices to drop is lacking confidence and uncertainty. Foreign investment could both increase and decrease. European investors may be less keen to be involved in large construction projects and there have been reports of investors activating ‘Brexit clauses’ allowing them to pull out of deals. On the other hand, some foreigners are taking advantage of favourable exchange rates to pick up property deals in the UK.
However, most of this foreign investment in large construction projects is taking place in London. I don’t see this having much effect on the Medway property market. That being said Fergus Wilson, the notorious British buy-to-let landlord, reports that he has been having difficulty after Brexit selling his 1,000 strong portfolio.
What’s going to happen to rental prices?
Many of my Medway landlords are wisely using the HMO strategy as it brings a great return on investment. They are worried that fewer Europeans entering the country will reduce rental demand. I would point out two things. Firstly, as many are now finding out, immigration can’t be reduced significantly by the government without adversely affecting the economy. As I said in my pre-Brexit posts, this country relies on immigration and it will continue to do so. Secondly, there is an increasing population and slowing construction all over the UK. Not enough houses are being built and generation rent will continue.
So I would predict no short-term effect on rental prices unless we hit a large economic recession and lots of people lose their jobs. In the long-term, rents will continue to rise.
There has been some talk of a possible repeal of landlord taxes and the increased stamp duty land tax (SDLT). It is a possibility that George Osborne will be forced out of office; if Boris takes over as new PM he may appoint a new chancellor. It’s possible but I wouldn’t get your hopes up!
Change creates opportunities. Whether you agree with this decision or not, if you are smart you will be able to capitalise on it. I believe HMOs will continue to be the favoured strategy in Medway, if you are interested to learn more please read my short guide to HMOs here. Property deals may continue to increase as homeowners and buy-to-let landlords sell up their properties.
I would be interested to hear what my readers think the consequences of Brexit will be. Please email me your thoughts at firstname.lastname@example.org or call me on 07944 726676.