Wading through the complex web of political rhetoric, we offer our take on what this ever-changing situation means for the property market.
On the 23 June 2016 the country voted 52% to 48% to leave the European Union in a closely contested battle which signified a huge shock to the political system. When the result came in the term ‘unprecedented’ was widely used by political commentators and whilst the territory was unchartered, the threat of economic uncertainty and hardship was nothing new.
A TURBULENT HISTORY
Economic hardship has been something of a staple of our post-war history. The 1970’s saw our first ‘double dip’ recession as a result of increasing oil prices and the 1980’s saw rapidly increasing inflation, manufacturing troubles and riots. In 1989 the Bank of England base rate increased from 7.88% in June 1988 to 14.88% in October 19891
, resulting in a record number of repossessions over the following years, reaching its peak at over 75,000 in 19912
. More recently, in September 2007, the collapse of Northern Rock began a chain reaction resulting in the country’s second ‘double dip’ recession. This banking crisis was more severe and the impacts were felt globally and for much longer, with UK GDP taking five years to recover to pre-crash levels3
. The question as to whether we have collectively learned from the past is debatable, however, in most cases the effects were relatively short-lived; therefore we ‘kept calm and carried on’.
TO WHAT EXTENT HAS THE BREXIT VOTE AFFECTED THE PROPERTY MARKET?
Since the referendum vote was delivered the political infighting has continued to dominate, as have the Prime Minister’s key slogans. The phrase ‘Brexit means Brexit’ is a well-worn mantra of Mrs May, but what does Brexit actually mean for investors? When investing in markets, advisers are able to tailor a portfolio to mitigate issues caused by such events, the values change daily and it is easy to monitor the value and performance at any given time. This is a more complex task when it comes to the UK property market. For many, the value of a property is only truly important when you are looking to buy or sell and is indifferent to data selected to fit the opinion of narrators on both sides of the debate.
The impact on the UK property market has been one of the threats widely commented on since the Brexit vote was delivered, with Mark Carney warning in September 2018 of a 35% reduction in property values should the UK leave with no deal, putting paid to the age-old phrase ‘safe as houses’. This may be overly pessimistic with data suggesting that since the referendum, national average values have increased, albeit marginally compared with previous years. The perception of the UK has always been that we are a nation of owner-occupiers with our obsession with bricks and mortar second-to-none; however, the UK in fact has the fourth lowest ownership levels in Europe, meaning that impacts on the costs of renting and the ability to get on to the property ladder will be more important to many.Rates of home ownership in Europe Vs population densitySource: HM Land Registary, Office for National Statistics – UK House Price Index
The year-end figures show positive news for the West Midlands, which reported the highest annual increase of 5.2%, followed by the East Midlands and Yorkshire, both at 4.2%3
. When compared to the pre-referendum results in May 2016 we see a reduction from 7% in the West Midlands and 8% in the East Midlands, but only a 0.2% drop from 4.2% in Yorkshire6
. The results show that despite Brexit uncertainty, the Midlands and the North overall remains in positive territory.
WEATHERING THE STORM
Since the referendum vote was delivered, it is difficult to support the bleak picture of the UK property market some have painted. Nationally we have seen an increase in property values of 10% since May 2016 and in the majority of regions house prices have continued to rise, albeit at a slower rate than we have become accustomed to. The property market has so far stood firm against Brexit headwinds; however, it must be said that the potential long term impacts are as yet unknown and will inevitably be inextricably linked with the deal we are able, or not, to strike with our European neighbours.
Brown Shipley are experts in developing sophisticated borrowing solutions for high net worth individuals. We can provide flexible mortgages, loans and overdrafts to help you buy, remortgage and improve residential property by:
- Understanding your financial landscape - looking at the source of your income and any alternative sources that may exist.
- Understanding your personal wealth balance sheet - reviewing your property and investable assets and how these can be used within any borrowing solution.
- Understanding you - focusing on how a family can support the next generation whilst preserving the family’s wealth in future years.
To discuss our lending solutions in further detail please contact your usual Brown Shipley Adviser.Daniel Porteous
// Client ManagerSources: 1. Bank of England 2. TIC Finance 3. ONS 4. Halifax 5, 6. ONS