Good morning guys, I hope you are all enjoying your weekend during this holiday season. This week we are talking about Brexit and houses prices and what it will mean over the next 12 months. In essence no one really knows what Brexit means in its entirety but this process of negotiations currently being undertaken is providing some understanding of the impact and significance it may have. In the mean time what will happen to the property market?  Firstly lets discuss what has happened so far and review the historic trends to see what that means as well. As soon as Brexit was announced we found there was a fall in prices which fell at around 5% around the suburbs of Greater London and since then they have been holding out very well and what we found is that volumes are lower and transaction levels have been lower but the demand has been higher than the level of supply so therefore prices have held up quite firmly. Whilst we have seen the fall off by 5% it has held very firmly since.

In essence what does Brexit mean for the future as we now know Article 50 is triggered. Firstly if you have been following the housing market especially if you have been following landlords you would be realising that the government has been severely meddling when it comes to landlords with stamp duty, section 24 taxes and the like. Now they will be so tied up with the Brexit administration I do not believe they will have much time whilst dealing with the Brexit negotiations and administration to meddle further with landlords or investors by putting forward further tax implications and punitive measures. What we tend to experience is when we have no interference or meddling from the government we find that the free market tends to prevail and it has historically been very good in the UK.

For instance if we go back in history between 1952 to 1988 you will notice the trend is an increase in the property market. Then of course in 1988 was the peak in the market and in 1990 there was a crash in the market. The reason for the crash was there was a couple of combining factors again government meddling was one of the issues. What happened was that we had double MIRAS relief and that meant for a couple you could get tax relief on your mortgage if the two of you banded together to buy a property. So what this meant was if there was a couple buying it would be significantly cheaper to buy prior to the MIRAS deadline. So we all piled in and consequently prices were driven quite heavily and after that everything was a bit quiet. Thereafter the reason for the quietness was because of Exchange Rate Mechanism (ERM). What happened was that we entered ERM and a person called Nigel Lawson put up interest rates in order to try and hold the value of the pound up and the markers were betting that the pound would fall. Eventually we pulled out of the ERM because interest rates at one point hit about 15% crazy right?????!!!! During this time a lot of people lost their home and it was a sad period in history for the housing market. Between 1991 to the present day it has indeed steadily increase we did have the crash again between 2006-2009 where the values of properties declined but since it has been increasing and now there is a question mark as to the reaction of the market to Brexit.

It seems as though for the future there may be a lack of supply which will allow prices to hold steady. Many vendors will choose not to sale on the back of not understanding the full implication of Brexit and the truth is many people including economists really understand the full implications of Brexit but what it means to us is where is the market going to be and what is going to happen. For us as investors it is great as you will realise it is only the motivated sellers who really want to sell their property and therefore we could get more of a bargain! It is all about supply and demand and an underlying need in London to get to accommodation and as far as London is concerned some of the outer areas may be different but there does seem to be an ongoing large degree of demand that cannot be quenched by the level of supply we currently have and we do not see that supply changing anytime soon as vendors do what us Brits are good at and that is when we are unsure we sit and wait but there will always be those purchasers who need to get to the area for work or generally for investment. However as the market goes up and runs away from people then it may get quite tricky. Brexit is already underway and the market will continue regardless and actually when the market dips slightly history tells us that longer term trend is upwards so in the scheme of things in perspective your money is safe in UK housing and no need to panic!

Best of Luck!