WOW! Brexit!
WOW! Well that was a bit of a shocker wasn’t it? Despite all the polls I don’t think many people thought we would actually vote to leave the EU.
Obviously the markets have all gone into melt down – it’s what they do when there’s uncertainty and for sure the UK is uncertain today about what is going to happen.
The market’s don’t like uncertainty and for a few weeks – until the road becomes a bit clearer – we will see low stock prices, a low sterling and most likely a stagnation, and possibly a fall in property prices.
However, we know that the underlying issue that drives property prices up and up is the demand we have in the UK versus inadequate supply. Nothing much is going to change there whether we’re in or out. We have a base or latent demand for property in the UK of somewhere between 2 and 3 million housing units (we’re not sure for instance how many people WOULD leave home and go into their own property if they could ) and with demand that high and insufficient supply we always have support for housing prices. But perhaps not this week!
The overriding issue we have is that people still need to live somewhere – whether we’re in Europe or not – but there will be a difference in how they live. When there is uncertainty the normal public (our Dom and Dora couple) don’t BUY houses, so they rent. For us as landlords this drives up supply and sadly for the UK public as a whole I suspect there will be an increase in rental prices overall as a result. So good news for landlords which I’m sure won’t add to our popularity!
In terms of interest rates I think it’s now less likely than ever that rates will rise! What the Bank of England do when there is market uncertainty is drop rates not increase them – so I suspect again that we’re going to be seeing a lowering of mortgage rates rather than any potential increase.
So if we go through our Take A RIDE issues: Actual evidence is the same – and our evidence this morning is likely to see a short term drop in prices. Ratio is affected by that and by wages. Wages are not likely to change significantly as we have almost full employment at the moment and again that isn’t going to be affected in the short term. Interest rates are likely to stay the same, Demand is the same and the Economy is likely to stagnate a bit.
In conclusion we have gone into a BUY phase of our investing – if we have the nerve. Warren Buffet says that he always wants prices to be falling when he is a net purchaser.
We are likely to be in a period of prolonged uncertainty. The knock on change of needing a new Prime Minister will add to that so we need to get very focused on our investing strategy.
Savings rates are likely to be dropping – if that’s possible – so the results we normally get from property are going to look very high – but it is going to be a rental market and a buyers market and we are all going to need a bit of gumption to take advantage of what is the biggest opportunity we’ve had to get into the property market place for some considerable time.
If you have money in a standard pension fund that is most likely to be invested in shares and so for today at least the value of pensions will have dropped significantly – but they will probably recover as they always do when the uncertainty is resolved.
Now is the time to go shopping for properties: stagnant prices, an uncertain economy and low interest rates – what could be better? Sadly though the media has gone into negativity melt down. The majority of people in this country should be celebrating today because that’s what they wanted so the mood should be buoyant but from watching the media for several hours this morning I can see that their view is doom and gloom. Hopefully in the next few hours (or possibly days) we’ll start to see the positives emerge.
Gill
