When Is the Best Time to Invest in The UK Property Market?
Brexit has dominated the headlines in the UK for more than three years now, ever since the electorate narrowly voted to leave the EU on June 23rd, 2016. However, we’re still no closer to achieving an amicable resolution or withdrawal agreement, with the proposed exit date having been pushed back yet again to January 31st, 2020.
The decision to call a General Election on December 12th has only added to the Brexit uncertainty, whilst the growing likelihood of a hung Parliament means that we’re unlikely to see any decisive shift in the House of Commons as a result of the vote.
This is certainly casting a shadow over the property market, creating a dilemma for landlords who are looking to add to their property portfolios. The question that remains is should landlords make their move now, or wait until Brexit has been completed and the UK has actually left the EU?
How Have House Prices Performed Since the Referendum Vote?
If you were to glance at house prices in the UK over the course of the last three years, you would see an upward trajectory and a sustained pattern of growth since June 2016.
More specifically, the average price of a home in the UK was estimated at £212,887 just before the referendum vote, with this increasing to 234,853 by August of this year.
However, it’s also evident that the rate of growth in the UK property market has slowed significantly since the spring of 2018, as Brexit has inched increasingly closer and continued to loom large over property owners nationwide.
Not only this, but prices also plunged after the summer of 2018, from 231,898 in August to just 227,771 in March of this year (which just so happened to be the initial Brexit date). Now, whilst it’s usual for property prices to stagnate during the summer months, this steep decline in property values was alarming whilst is also appears as though the trend is about to be repeated.
The key takeaway here is that property prices seem to slump alarmingly as proposed Brexit dates approach, only to rebound in line with established cyclical patterns and trends. However, the rate of growth in the market is slowing, and the question that remains is whether this will continue once the UK has actually left the EU.
From a short-term perspective, however, landlords may want to leverage these predictable declines in price points to secure a more competitive deal in the build-up to Brexit.
What About Mortgage Rates?
The price of a house is not only the only consideration when investing in property, as buyers must also pay attention to mortgage rates and the cost of home insurance from providers such as Homelet.
When it comes to the former, we’ve seen the Bank of England raise the base rate of interest from 0.25% in November, 2017 to 75% in August 2018 (in two separate installations).
However, it’s widely predicted that the rate may be pared back to 0.5% in the New Year, following a recent meeting of the Monetary Policy Committee which saw two out of the nine members vote for a decrease.
Given this and the potential decline in prices, landlords may be looking to snap up additional property in the build-up to the Brexit deadline date of January 31st.
This may enable them to benefit from more competitive prices and lower fixed-rate mortgage rates in the short-term, regardless of whether or not another extension is granted by the EU in the New Year.
The issue with this strategy is that there’s no knowing how the market will react to Brexit, particularly without any viable information pertaining to the term of which we’ll ultimately leave the EU.
In the case of a no-deal, for example, property prices could decline significantly as demand falls away, causing landlords to see the value of their investment tumble for an indefinite period of time.