Brexit – What’s Next?

‘I am an old man and have known a great many troubles but most of them never happened’.
Mark Twain ( 1835-1910)

You will understand that we are asked by clients on almost a daily basis what a Brexit at the end of March will mean in the Harrogate property market.

The short answer is that we don’t know, no one knows, as a great deal depends on the nature of our Brexit exit.

Will it be on the basis of a bad deal or no deal?

I have been holding off writing a Brexit blog with my current thoughts as I do not want to add any fuel to either the scary or more relaxed stories being banded around in the press. However, this is clearly a topic that Harrogate Home owners and Landlords, and particularly new Buyers are thinking about all the time.

Whilst there may be a deal to be done with the EU there is still a huge amount of uncertainty about the implications of any or all of the exit plans being floated at the moment and so I am going to try and provide below what I hope to be a fair / unbiased piece on what I think would happen if a hard Brexit / No deal takes place in March 2019.

Here we go!!!

After the weather and football, the British obsession with the UK property market is without equal in any other country in the world. The Daily Mail, and all the other mass market publications have the state of the country’s property market on its standard weekly rotation of front-page shock horror stories.

I take the view that there are better economic indexes/statistics available in order to judge the economy, and, more importantly for us, the property market than reading the headlines in the papers. In the real world outside of Westminster it’s the number of property transactions per month which is the more reliable barometer of the state of the property market and our feelings about the future.

Concerns in the popular press after the Brexit referendum of two years ago, that this decision would lead to a rapid crash in property values on a national basis were entirely unfounded, although it’s fair to say that the rate of increase in property values locally have slowed very slightly since the summer of 2016.

What hasn’t happened locally is any slowdown in the number of sales. We have the best quarter ever for the number of sales/completions. Trust me, very few folk wish to move home on Christmas eve but even so we completed 28 sales in December – amazing!!!!

OK, so before we start panicking, let’s ask ourselves, what exactly has happened in the last couple of years here since the Brexit vote?’.

House prices in Harrogate have risen since the EU Referendum

Clearly the EU vote hasn’t caused any major issues here so far but if there was a large economic jolt in March this could change, but I cannot see a heavy blow and here’s why.

The property market is mainly influenced by interest rates and salaries.

A hard Brexit would depress wage growth to some degree, yet the level of the change would depend on the, as now, undetermined type of Brexit deal (or no deal) in place. If trade barriers are imposed by the EU after a hard Brexit, imports will become more expensive, inflation will rise and economic growth will decline. However we are not in the Euro, meaning these adverse effects would be tempered by the exchange rate of the Pound against the Euro. In plain language, a hard Brexit on a national basis would be worse for house prices in the short- medium term than a bad deal.

So why did the Governor of the Bank of England quite recently suggest a disorderly hard Brexit would depress house prices by up to 35%?

I’ve no idea (other than he has discovered/partaken of some of our superb local Rhubarb Gin?) and would like to remind the Governor that property values on average/nationally during the 2008/9 economic crash,  dropped 16% to 19% over an 18-month period. If we had a similar percentage drop after March this year this would still only take us back to the property value levels we were achieving in 2015.

Let’s not forget that after the last crash the Bank of England have introduced various measures to ensure we didn’t have another convulsion in any future property market. One of the biggest factors of the 2008/9 property crash was the level of opportunistic lending by the Banks. The Bank of England Mortgage Market Review of 2014 forced the Banks to lend on how much borrowers had left after regular expenditure, rather than on their income. Income multipliers that were 8 or 9 times income pre-credit crunch were significantly curtailed . The Banks could then only offer a small number of residential mortgages above 4.5 times income, and had to assess (stress test) whether the borrower could afford the mortgage if interest rates at the time of lending rose by three percentage points over the first five years of the loan.

Bottom line, a great many of the potential financial stumbling blocks have already been weeded out of the system.

So, what next?

It seems to us that only a few Harrogate home owners hung back to wait for the new year and those that did are coming into the market now. They are banking on the ‘Teflon town’ to ride out any upcoming economic storms, as it has did in 2008/9 and in so many other times before. This means more choice for buyers. The same can be said for Harrogate landlords & tenants are coming into the market now with a vengeance. They share Mark Twain’s view of life.

Brexit, No Brexit, Hard Brexit… in the whole scheme of things, it will all be just another footnote in history in a decade.

We have survived the Oil Crisis and 20% + Hyperinflation in the 1970’s, Mass Unemployment in the 1980s, Interest Rates of 15% in 1990’s, the Global Financial Crash of 2009… and even the Spice girls. Let’s never forget, whatever happens people still need houses and a roof over their heads. If property values decline, it is usually only a drop in ‘paper’ value because you only lose when you actually sell and even then most Harrogate transactions involve selling and buying in the same local marketplace and all is balanced out.

Finally, we just aren’t building enough homes nationally, and any shortage of supply always drives up prices. Property is a long game and so no matter what happens during Brexit the iron rule applies – the property market always comes good.

I hope the above was helpful – if not you could always pour yourself a Rhubarb Gin.

If you wish to discuss the above or are interested in the Property market in Harrogate then please come along and see us and enjoy a free no obligation chat about the property services we provide.

Charles

Charles

About Charles

This blog follows the residential Sales and Lettings market in Harrogate, Knaresborough and surrounding villages.You will find information, analysis and guidance here along with news about Harrogate. I’m Charles Myring working in the Myrings Estate Agents Ltd business alongside my son Simon , daughter Gemma and dedicated sales teams. If you're thinking of Selling / Buying / Letting / Renting property locally Myrings would be happy to assist.