The Brexit vote was just 4 weeks ago today – but it seems much longer. Here is our latest assessment of the impact on the Buy To Let Market:
House Prices
Before the referendum the treasury forecast for house prices was they would fall by between 10% and 18% in the event of a vote for Brexit.
The response from the industry has been generally more optimistic. The first reaction has been downturn in housing transactions as buyers and sellers of property adopt a “wait and see” stance.
This may be especially marked in the prime London market although foreign investors will be encouraged by a fall in the pound.
An analysis of the impact of the Brexit vote on house prices was published by property market analysts Hometrack in the days after the vote This forecasts a deceleration of house price growth in all cities during 2016. However the report concludes that the fundamentals of the housing market remain unchanged with record low mortgage rates and a wide imbalance between supply and demand.
Interest Rates
Before the referendum vote the treasury produced a forecast on mortgage rates – a possible increase in average mortgage payments of up to £1000 per year if Britain leaves the EU. This will depend largely on the bank base rate set by the Bank of England and here two factors come into play.
The Bank has a duty to control inflation by increasing the base rate but may decide to reduce the base rate to stimulate the economy in the event or an economic downturn or a recession.
The fall in the value of the pound will tend to increase inflation as imports will be more expensive but it remains to be seen if the UK economy will go into recession and if the Bank of England will need to adjust the base rate up or down over the next year. For the time being mortgage interest rates have remained very low.
Housing Supply
Following the Brexit vote shares in the volume housebuilders fell sharply in value and most commentators have taken the view that there will be pressure on house builders to cut back on investment.
This will lead to fall in the number of new houses built and therefore to a reduction in housing supply. Brexit could also have a negative impact on the relatively small but previously fast growing “Build to Rent” sector of the house building industry.
In the long term it is also possible that the availability of labour and construction materials from the EU will be a constraint on house building.
We will all be discussing the outcome of the EU Referendum vote and Brexit at our next PIM on 28 July 2016 at Holiday Inn, Bristol City Centre, 6-9 pm – when our headline speaker is Richard Bowser : Post Brexit – What’s Next?”.
We hope you will join us for this important discussion.
For more info and to reserve your place Click Below
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