Date Published 21 May 2019
Is Brexit the real reason behind the perceived slow down to the Housing Market?
Six months ago, I wrote an article about how I felt a Hard Brexit would affect the housing market in Worthing. The truth is, I didn't think I'd be writing another one post 29 March! But, we are where we are so I thought now might be a good time to discuss if Brexit has affected local house prices, and what might happen over the next few months.
'Brexit hurting property market'
This is just one of many similar headlines you'll have seen across various news platforms over the few past weeks and months. I think it's important to look not just at the headline, but at other less obvious (or populist) reasons for changes in the markets.
We can drawer parallels to the car industry. Jaguar Land Rover announced in January that it was cutting as many as 4,500 jobs from its UK workforce. Immediately Brexit was blamed. However, if you look closer you'll find that Jaguar has faced serious difficulties in the Asian markets, with sales in China down nearly 18%. The same can be said for Honda – They announced the closure of their Swindon plant in February. Again, Brexit seems to take the brunt. However, Honda mothballed half of the plant after sales failed to recover following the financial crisis in 2008. Whereas it used to make the Jazz, CR-V and Civic with capacity to produce 250,000 cars a year this fell post 2008 to producing just 150,000 Civics. The switch to the manufacturing of electric cars also played a major roll. By moving production back to Japan, Honda will be able to ship to China (a much larger market for EVs) with relative ease. Honda has also recently struck a deal with the EU meaning that tariffs on Japanese-made cars will be phased out by the end of the year, reducing the financial benefit of the UK plant. I'm not saying that Brexit isn't part of the reason, but it's certainly not the only, or even primary reason, in a lot of situations. Brexit has created uncertainty and in uncertain times people put off large purchasing decision. We can see this evidenced with new car registrations for March 2019 being down 3.4% on 2018.
What's uncanny is when I started writing this article I honestly didn't know the figures I'm about to show would be so close in comparision. Based on the latest Land Registry data available (January 2019), property transactions in Worthing are down 3.2% - As I said above, in uncertain times people put off large purchasing decision (what's a bigger decision than buying a house?!). But, is Brexit the real reason for this and does this really affect you?
In July last year I wrote about how Equity Release was having an impact on the number of properties for sale in Worthing. Total equity release withdrawals grew 29% year-on-year to an unprecedented £3.94b in 2018. What this means in practice is that the over 55s are choosing to remain in their homes and release equity, rather than downsizing to free up cash. This decreases the number of properties available to buy and so it should follow that transaction numbers decline as well. The reasons why so many over 55s are choosing equity release over downsizing are, in short; the interest rates of equity release mortgages remain at record lows, products are more flexible than ever, the cost of moving has increased significantly and from a life style point of view, people get to remain in the home they love.
In November 2015 the Government announced the introduction of a 3% levy on purchases of buy-to-let properties or second homes. The change took effect in April 2016, which led to a huge surge in property purchases the month before and in March 2016 149,710, the highest ever number of completions in a single month, took place because people brought forward their purchases to save money. 71,470 more sales took place in March 2016 than in March 2015. It's probably not surprising then that over the following 7 months there were 74,350 less sales. However, because the Referendum took place just 2 months after the Stamp Duty changes Brexit was continually sited as the reason for the declining sales.
Brexit is even being blamed for our poor performance at Eurovision on Saturday! Have people forgotten that we've finished LAST 4 times in the past 20 years - It's not a new phenomenon!
Since the referendum I've been asked numerous times by friends and family 'Should I buy now or wait until after Brexit?' The first point I make is that we have no idea when ‘After Brexit' will be! As I said to start, I didn't think I'd be writing another piece along these lines. I also say that it depends hugely on your personal circumstances. There are so many individual factors to take into account when deciding whether or not to make the biggest purchase of your life that there is no straight answer. The advice I give for people to consider is:
• If you're a first time buyer mortgage rates are historically low, which means your monthly payments are as cheap as they'll ever be. Furthermore, if you fix your interest rate then you don't need to worry about rate rises for that period.
• If you're a home mover, then it doesn't matter if you move in a rising or falling market – it's all relative.
• If you're downsizing, then due to the lack of larger properties on the market at present you should achieve a good price for your current home.
This is not a pro or anti Brexit article – The purpose is to highlight that the headlines we see about Brexit hitting the market and causing a slowdown don't give the whole picture. You might be surprised to know that house prices in Worthing have risen 6% since the referendum. They'll be those that say this slower level of growth is cause for concern. They may well be the same people that complain when house prices get out of control and rise rapidly like we saw in the early 2000s. They're probably the same people who complained that house prices fell during the recession in 08/09. There's no hard and fast rules to determine when is a good time to move, but there is no logical reason why Brexit should be preventing you.
I'd love to hear your thoughts.