Thursday, 28 April 2016

What would Brexit mean to Penicuik’s property owners?

The date of the EU referendum is less than 2 months away .... although at times the endless claims and counter-claims by the ‘In’ and ‘Out’ sides does make each day seem like a lifetime!

If we as a country were to unshackle ourselves from chains of Brussels, could this make UK house values drop?

If you read all the UK wide newspapers, the Brexit debate seems to be focused solely on central London. Many commentators have said that Brexit would mean central London would have a lower standing in the world, meaning fewer people would be employed in Central London. That implies lower wages, fewer jobs etc… in Central London.

But we are in Penicuik, not Marylebone, Mayfair or any part of Zone 1 London.

On the run up to the vote on 23rd June I predict:

‘In’ Camp

The ‘In’ camp will start to scare homeowners with forecasts of negative equity is we vote ‘Out’.

‘Out’ Camp 

The ‘Out’ camp will appeal to the 20 something market, which has been priced out of the property market, with the prospect of a new era of inexpensive housing is we vote ‘Out’.

Should we believe the fears of central London estate agents and developers who believe the bottom will fall out of the market if we do leave?

Well, I do think that we should.  The only reasons the Mayfair, Knightsbridge, and Kensington property of central London are attractive to foreign buyers are political and economic steadiness, an open and honest legal system and a lively cultural lifeNone of that is threatened by Brexit.

...but again, we are in Penicuik and central London is 391 miles away.

We are hometown to Penicuik Athletic FC, Penicuik Rugby Football Club and Jim Aitken, the ex Scottish rugby captain. While the central London property market exploded after 2009, that explosion really and honestly didn’t affect the Penicuik property market in the same way.

So, putting central London aside, what would an ‘in’ or ‘out’ vote really mean for the 5,196 property owners of Penicuik?

Initially, over the coming months on the run up to referendum, I believe it will be like the run up to last year’s General Election or the Scottish Independence Referendum in 2014. With the short-term uncertainty in the country, quite often big decisions are put on ice and people are less likely to make big money purchases i.e. buy a property.

However, in the months leading up to last year’s Election, property values in Penicuik remained the same which is not bad for a country that thought it would get a hung parliament!  Also, in the months leading up to the Scottish Independence Referendum in 2014, property values in Penicuik decreased by only 0.3% which is quite remarkable given the fundamental change that was being discussed.

So that argument doesn’t hold much weight with me.

Post vote, should the UK opt to leave Brussels, there would be a much more noteworthy impact. I believe that a vote to stay in the EU would see the Penicuik property market return to a status quo very quickly, but the contrasting result could lead to some changes.

The principal menace to the Penicuik (and UK) housing market could be variation (in an upwards direction) in interest rates, theoretically seeing the cost of mortgages grow swiftly, pricing many out of the market…

... but, two thirds of landlords buy without a mortgage, so that won’t affect them in the short term at least.

According to the Bank of England, 80.33% of all new mortgages taken out in 2015 were fixed rate. Looking at all mortgages as a whole, according to the Bank of England, 44% of all UK mortgagees have a fixed rate mortgage, but 56% don’t, so if you aren’t on a fixed rate ... talk to your mortgage broker now, because they can only go in one direction!

In reality, if I really knew the future, I wouldn’t be a letting agent in Penicuik, but a City Whiz Kid in London earning millions.

However, I suspect whatever decision the electorate of Penicuik and the country as a whole makes, over the long term it won’t have a major effect on the Penicuik property market. We have seen off:

·                     The ‘end of the world’ credit crunch of 2008/9 and subsequent property crash.
·                     The 1988 Nigel Lawson induced post dual-MIRAS property crash.
·                     The 1979 Winter of Discontent property crash.
·                     The 1974 oil crisis that stimulated another property crash ....

... hell, we can even go back nearly a century with the 1926 post General Strike slump in property prices ...

Today, property prices are 274.47% higher than 20 years ago in Penicuik and are 1.01% higher than 6 months ago.

So, make your own decision on 23rd of June safe in knowledge that whatever the result, there might be some short term volatility in the Penicuik property market, but in the long term (and property investment is a long term strategy) there aren’t enough houses in Penicuik to live in either to buy or rent.  Until the Government allow more properties to be built – the Penicuik property market will be just fine. Even if it has a little blip in the summer, there could be some property bargains on the run up to Christmas to be had!

For more advice and opinion on the Penicuik property market, even where those buy to let bargains could be found now - visit the Penicuik Property Blog.

If you are a landlord or thinking of becoming one for the first time, and you want to read more articles like this about the Penicuik Property Market together with regular postings on what I consider the best buy to let deals in Penicuik, out of the many of properties on the market, irrespective of which agent is selling it, then feel free to get in touch!  Email me on lettings@thekeyplace, call me on 01968 674601 or if you are in the area feel free to pop into the office at 6 Bank Street, Penicuik where the kettle is always on.

Double click here to view back dated Penicuik Property News articles.

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