It
is interesting times at the moment for the Penicuik property market.
As
we all know by now, the United Kingdom & Northern Ireland overall voted
narrowly to leave the EU but Penicuik in particular and Scotland in general voted
overwhelmingly to remain in the UK and, as a result, the Scottish Government is
talking about Scotland remaining in the EU via Indy Ref 2.
What next for the 5,302 Penicuik
homeowners especially the 2,822 of those Penicuik homeowners with a mortgage?
There are two layers to this
The
first layer is – What next for Penicuik homeowners if Scotland stays with the
rest of the United Kingdom and leaves the EU?
With the second layer being – What next for Penicuik homeowners if
Scotland stays in the EU and separates from the rest of the United Kingdom?
Taking the first layer first
...... Scotland leave the EU along with the rest of the United Kingdom
The
Chancellor in the EU referendum campaign suggested property prices would drop
by 18%. Using Treasury estimates, their method of calculating this was tenuous
at best, but focused around the abrupt and hasty increase in UK interest rates,
which in turn would raise the cost of mortgages, and therefore lower demand for
property, causing a drop in property prices.
Penicuik
property values
I
agree that Penicuik property values will probably drop in the coming 12 to 18
months – but by 18% – I am sorry I find that a little pessimistic and believe
that figure was rhetoric to get homeowners and landlords to vote in a
particular way. But the UK property
market is quite a monster.
Since the
last In/Out EU Referendum in June 1975,
property
values in Penicuik have risen by 1894.7%
(That
isn’t a typo) and whilst property prices did drop nationally by 18.7% between
the peak of 2007 and bottom of the market in 2009, when one compares property
values today in the country, compared to that all-time high of 2007 (the period
before the financial crisis of the Credit Crunch of 2008/9) .... they are still
up 10.14% higher.
Another
Credit Crunch?
And
so, notwithstanding the Credit Crunch, the worst global economic outlook since
the 1930s and the recession it brought us, a matter of a few years later, the
Government was panicking in 2012/3/4 that the housing market was a runaway
train.
Now
the same Credit Crunch doom-mongers and Sooth-Sayers that predicted soup
kitchens in 2008/9 are predicting Brexit meltdown. Bad news sells newspapers.
Stock markets may rise, stock markets may fall, yet the British public
continued to buy property in 2009/10 and beyond. Aspiring first time buyers and
buy to let landlords dusted themselves down, took a deep breath and carried on
buying .… because us Brit’s love our Bricks and Mortar .... we need a roof over
our head.
However,
as mentioned previously, if the value of the pound drops, in the past UK
Interest Rates have risen to reverse that drop. However, whilst a cheaper pound
will make your pint of Sangria a little more expensive on your Spanish holiday
this year and make your brand new BMW pricier .... it will make British export
cheaper! Which is great for the economy.
Interest
rates
…
and what of interest rates? Since 2009, interest rates have been at 0.5% and
lots of people have become accustomed to those sorts of levels. So what if
interest rates rise .... end of the world? Interest rates in the 1986/88
property boom were on average 9.25%, in the 1990’s they were on average around
6.5% and uber-boom years (when UK property values were rising by 20% a year for
three or four straight years across the UK) .... 4.5%. Many of you reading this
who are in their 50’s and older will remember interest rates at 15%.
But
I suspect interest rates won’t rise that much anyway, as Mark Carney (Chief of
the Bank Of England) knows, raising interest rates causes deflation – which is
the last thing the British economy needs at the moment. In fact they have been
printing money (aka Quantitative Easing) for the last few years (which causes
inflation) to the tune of £375bn a month and there is fresh talk of doing this
again now. A bit of inflation because the pound has slipped on the money
markets (not too much mind you) might be a good thing?
....
because whilst property values might drop in the country, they will bounce
back. It’s only a paper loss .... because it only becomes real if you sell. And
if you have to sell, again as most people move up market when they sell, whilst
your property might have dropped by 5% or 10%, the one you want to buy would
have dropped by the same 5% to 10% .... and here is the best part – (and work
your sums out) you would actually be better off because the more expensive
property you would be purchasing would have come down in value (in actual pound
notes) than the one you are selling.
The Penicuik landlords of the 530 Penicuik
buy to let properties have nothing to fear neither, nor do the 1,272 tenants
living in their properties.
Buy
to let is a long term investment. I think there might even be some buy to let
bargains in the coming months as some people, irrespective of evidence,
panic. Even if we pull up the drawbridge
and immigration stopped today, the British population will still increase at a
rate that will exceed the current property building level. Britain is building
139,600 properties a year, but needs according to the eminent ‘Barker Review of
Housing Supply Report’, the country needs to build about 250,000 properties a year
to even stand still, and as the birth rate is increasing, the population is
living longer and just under a quarter of all UK households now are occupied by
a single person demand is only going up whilst supply is stifled. Greater
demand than supply equals higher prices. That is definitely a fact.
Turning to the second layer first
...... Scotland stays in the EU and deparates from the rest of the United
Kingdom
The
first things to say about this is that there is even more uncertainty about
this as the Scottish Government would need to ‘do a deal’ with the EU and the
rest of the United Kingdoom and the Scottish people would need to agree to it
through a referendum.
Therefore,
in the short term the likelihood it that Penicuik homeowners will be impacted
as if we were leaving the EU ie the first layer as discussed above.
However,
if Scotland stays in the EU and departs from the rest of the United Kingdom
then the fundementals that existed in the Scottish economy before the vote on
Thursday may come to the fore again. You
may have forgotten what was happening before Thursday’s vote (I can’t believe I
am saying that but it has been an temultous few days!) but the fairly strong
economy, the increasing population, the desire for more people to live alone or
in smaller numbers and the lack of house building were all pushing up house
prices and rents.
So, what will happen next?
Well,
there are many challenges ahead. The country has spoken and we are now in
unchartered territory – but we have been through a couple of World Wars, an Oil
Crisis, Black Monday, Black Wednesday, 15% interest rates and a Credit Crunch …
and we survived!
And
the value of your Penicuik property? It might have a short term wobble… but in
the long term – it’s safe as houses regardless.
A few more interesting articles about the
Penicuik property market:Penicuik property – weirdest deal breakers http://bit.ly/28QAmw4
- Penicuik or Dalkeith for a Buy to Let investment. Which is the best? http://bit.ly/1Pv7ouS
- Who is to Blame for Crisis in the Penicuik Property Market? http://bit.ly/1VOjs0V
- £4,400 helping hand for Penicuik first time buyers http://bit.ly/1XSYJJd
- ‘Generation Rent’ in Penicuik to grow by 40% by 2021 http://bit.ly/1Wl9LrD
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