This article appeared in our recent newsletter, and has beed replicated here. If you would like to receive the newsletter monthly please do email firstname.lastname@example.org.
We have had our record start to a year for sales, and those on the move this year, whether buying or selling, should be reassured by the following article from our Sales Director, Donald Collins, detailing that despite the never-ending ‘Brexit’ speculation, demand for property in Ealing and Acton remains high and there is good reasons for buying too.
‘Brexit’, surely the most overly-used phrase in the Country for the last two and half years.
Government resources and media agendas have been driven by consequences nobody can actually forecast with any accuracy and a changing narrative of cliff-hanger type proposed consequences.
The market dislikes uncertainty and we are now risking the 6th major election in 5 years: the Scottish Independence vote, General Election 1, Brexit Referendum, Tory Leadership, General Election 2 and now to today’s scenario of potentially another Tory leadership campaign, a general election or the growing suggestion of a second referendum (with maybe the possibility of people knowing what the alternative is to EU membership as opposed to spending two years and half years arguing about it).
From an economic viewpoint, to put the exit from the EU into perspective, The Economics Editor of The Times, Philip Aldrick, wrote on Friday 16th November 2018 after summarising a ‘Brexit warning paper’ from The International Monetary Fund.
“A free trade deal, one that is less ambitious than that sought by either Britain or the EU, would cost the UK about 3.1 per cent in lost growth by 2030 under its central estimate compared with no Brexit. That is 0.28 per cent less output every year, equivalent to £5.6 billion or £215 per household, and would leave the government needing to borrow about £2 billion more annually to cover its spending plans.”
To put this into context, at the end of March 2018, the UK’s national debt was £1.78 Trillion, yes that’s T for trillion.
This is the crux of it, we are where we are in the world, 45 years of being part of the EU. People have still bought and sold properties for many years and the London Borough of Ealing market has gone up 363% in 20 years while the country has had a Trillion pound of debt round its neck.
Worth highlighting too, the recent wide-spread protests in France, with vast numbers of people out protesting every weekend since mid-November (at its peak so far an estimated 300,000 were involved) over the cost of living and fuel costs. France are an integral member of the EU, yet they are seemingly not very happy with their lot!
In the circumstances: the market has remained robust
Given the hyperbole news reporting on various ‘Brexit’ scenarios, given the Bank of England Governor’s views being taken out of context for a news agenda, given all the elections fostered upon us in recent years, given the heavy taxation and finance burden on buy to let, given the Government support for the new build sector against the resale sector (‘Help to Buy’) it says a lot about the strength of the housing market that it is not faced a double-digit percentage decrease.
Yes, the media has pointed to some big decreases in certain areas, but you cannot apply a one size fits all approach. Where we have seen substantial decreases, it tends to be in the properties that are compromised on location, part of high density developments or have quirky style/layouts: generalised statistics don’t take account of the various market segments. In demand property remains just that: in demand.
The fundamentals of a market shift
If you are in a house at £700,000 and want to trade up to a £900,000 home, if the market does come down 5% it is worth putting into context that you are only hypothetically £10,000 worse off.
You are already in the market, so any percentage decrease will only affect your trading gap which in the above example is 5% of £200,000. I am not for one moment disregarding the importance of £10,000 but my point is to reiterate the sense of perspective to how any perceived market shift will affect you.
You are already in the market, yes of course there is other costs involved and I am not downplaying stamp duty or transactional costs, but given you have made the decision to move and the timing is right for you these are costs that you would need to bear in any market. Ultimately, if you want to move; do not hold back because of a perceived potential future market fall given you will be experiencing a similar fall in your own property you own right now.
This only comes into play of course if there is a market shift negatively; we have yet to see across the board evidence of this in our area, but I am keen to emphasis the point given the various discussion points in the media.
What if you are a first time buyer?
I met a first time buyer the other week who could have bought 3 years ago in the market for a budget of £350,000, due to two wage increases his budget is now £420,000. He was put off buying three years ago by various people and has subsequently stayed in rented, watched various 10pm news snippets and read various news articles that has publicised ‘Brexit’ and all the negotiation woes of the British Government.
He has not felt motivated to get on with the purchasing decision until recently when a) he has realised the world is not ending (two wage increases in two years also maybe helped him realise this!) and b) realised the money he has lost by being on the sidelines.
He has been renting a one bedroom flat for 3 years since he has been in a position to buy paying £1200 per month year 1, £1250 year 2 and now pays £1275 per month, year 3. In 3 years, he has paid £44,700 in rent.
His buying deposit £60,000 has achieved around £5400 in interest in that time so that goes nowhere near close to offsetting the money spent in rent, albeit he would not have been paying the mortgage interest element.
He has been waiting for the market to drop substantially – it hasn’t, and he informs me that the properties he is looking at now don’t excite him to a greater extent than they did previously. After switching off from the market for the last three years he now wishes he had bought, paid down the mortgage instead of renting and now would have been in a position to trade up not just getting on the ladder.
Given the level of rent you need to pay for suitable accommodation you can question whether a substantial drop in the market is actually going to happen to make it worthwhile being ‘out of the market’. We all generally have to pay a large proportion of our monthly income on a roof over our heads whether we are paying rent or paying off the mortgage.
We know the market hates uncertainty; yet, despite everything it has had thrown at it in recent years it still remains robust. As a purchaser you may well be frustrated if you remain on the sidelines and wait for that ‘perfect’ moment that a) may be a long, long time in coming given the state of the ‘Brexit’ negotiations and b) may not arrive at all.
If you are a seller you can feel rest assured that as an agency we are fully versed in the ‘Brexit’ lexicon and what it means for the perception of buyers and how to put the market in the correct context.
If you have experiences in the market that you would like considered for the next newsletter, or would like to book a valuation on your own property please feel free to reach out to me on direct dial 020 8017 7944 or email email@example.com.