More than two weeks have now passed since the UK voted in favour of leaving the EU, in a move that has sent huge shockwaves through the financial markets and the property market.
It is likely to be several years before the full impact is completely realised – for now, companies, investors, city traders and the banks are working to reduce the negative effects and stabilise the markets.
Property is one area that looks set to be hardest hit as confidence is undermined. Several property-based investment funds have been suspended – at least seven funds have taken the measure so far, with Aberdeen Asset Management the latest – to stop people withdrawing their investment.
As the name implies, a property fund’s value is almost entirely tied up in property. They are generally sound investments, especially in London where property values have increased at far faster rates than many other investment funds can offer.
However, the funds are less easily accessible than cash-based investments, for example. In the event of widespread investor panic, such as we have seen following the Brexit referendum, it causes huge problems for the fund, which cannot simply ‘withdraw’ its investors’ money.
Hence, the decisions to suspend the funds have been taken.
This is the very top end of the market, but the drip-down effects will impact people at every level of the property market – whether you are buying or selling a house, or you are a landlord.
A number of other effects have been predicted, some of which have already come to pass:
- House prices fall – aside from damaging people’s assets, this could leave a lot of people in negative equity. Help to Buy was great at invigorating the market, but has exposed people to the risk of negative equity, as their debts amount to more than their assets.
- Sales fall through – especially as there is a very good chance that both house prices and interest rates could drop before the end of the year. Mark Carney, governor of the Bank of England, has already said he is monitoring the housing market very closely. The chances of a 0.2% base rate – or even a negative value – is not beyond the realms of possibility. This is good for borrowers (a very low ten-year fixed rate mortgage has just been launched), but it means people are waiting to find out what happens rather than commit to a purchase now – especially if they think they might be able to batter the price down further still in a few months’ time. Anecdotal evidence from estate agents already suggests that increased numbers of sales have fallen through in the past two weeks as nerves hit the market.
- People looking at emigrating – this may have just been emotional post-Brexit talk from pro-Remainers, but there were reports of increased google searches for ‘how to emigrate’ following the referendum. This could see the property market flooded with properties – likewise if landlords look to sell off their portfolio now rather than take a hit in the long-run (especially with tax rules changing) – which again could impact values and slow sales down.
The early signs appear to be that none of this is scaremongering – more accurately, it reflects a need to monitor the markets carefully and take measures to prevent a housing crash.
None of this will change 365 Property Buyer’s approach to the market. We will still promise to buy any property, and we are confident that we can offer sellers who have grown frustrated at the market, or who cannot sell their houses through normal channels, a satisfactory outcome that will enable them to move on with their lives.
If you are struggling to sell your home, or if your house sale has fallen through because the buyer got post-Brexit cold feet, speak to us and we can help you get the move you want.