Laura Gill, a solicitor at JPC Law, takes a look at the decision that has raised more questions than have been answered such as how will Brexit impact the residential property market? The momentous referendum vote causing shockwaves as the UK voted to Brexit, ending a 43 year relationship with Europe and leaving the UK in a state of uncertainty.
It is difficult to assess the short and long term impact of Brexit on residential property but what is apparent is the uncertainty which has served only to damage confidence in the market.
Prior to Brexit, we were informed that house prices would soften. However, reports have confirmed either a slow down in the market or post Brexit negotiations between buyers and sellers leaving them and landlords cautious about their next move.
The Weaker Pound
Following Brexit, the pound plummeted to levels not seen since 1985. The weakness of the pound suggests that the benefit of the exchange rate is most likely to apply to overseas investors especially in London and other major cities in the UK where the rental market is more prevalent. Could it be that only European investment is affected and that global markets will continue to thrive, appealing to investors in Asia and the Far East? Will this affect the property market in other areas of the UK where buy to let investors are not so commonplace? Buyers in these areas are buying their main residence and will still need somewhere to live regardless of the position. Sellers are also upsizing or downsizing, so, if supply and demand settle on a level playing field, areas outside London may not feel the impact of falling prices.
With buyers exercising caution and waiting to see what will happen over the coming months, they may put purchases on hold and look to rent for longer which in turn could prove to be advantageous to landlords making it more attractive to invest.
On the contrary, given the stamp duty hike in April and the other onerous burdens placed on landlords including the Bank of England tightening their mortgage lending criteria, it could be the end of the ‘buy to let boom’.
Interest Rates
The recent cut in interest rates to 0.25% announced by the Bank of England earlier this month may perhaps generate more demand from buyers but with savings account rates falling, buyers will feel the pinch on their savings and deposits will not be available to the all important first time buyer. Also, the cut in interest rates is more likely to be of benefit to existing home owners and those with variable mortgage products as they stand to make a saving on their monthly payments.
Lease Extensions
If, as predicted, house prices start to soften then it may be good news for flat owners, particularly those looking to extend their leases. Now may be considered a good time to make a lease extension claim as the cost of the claim is likely to decrease by the end of negotiations. The fall in house prices is however expected to be short term with forecasters predicting rises in 2017/2018 although levels might not be as they would have been if we had voted to remain. So prudent flat owners should really consider their position and look into serving notice sooner rather than later.
On the other side, landlords may feel compelled into agreeing current claims to stop tenants withdrawing existing notices believing they may triumph in achieving a lower premium if they withdraw and serve at a later time.
If’s and but’s
In the end, speculation on the market can only be based on if’s and but’s until there is some certainty and assurance going forward.
Taking into account the potential of a negative impact on the buy to let market, we may even see a review of George Osborne’s heavy handed approach on tax changes to buy to let investments.
Whatever the case, Article 50 has not yet been triggered and one thing that is abundantly clear is that the withdrawal process could take months if not years to be achieved. It will be some time before we truly learn the impact of Brexit on the residential property market – good or bad!
About Laura
Laura Gill is a Solicitor at JPC Law. Laura can be contacted by email or on 020 7625 4424
