UK Property Market Held Back By Brexit
The latest report from Nationwide shows that UK property market remains subdued with the political turmoil and uncertainties over Brexit the main factor. The Nationwide House Price showed a 0.7% increase over the same month last year and 0.2% higher than last month. London was the weakest performing region with prices 3.8% lower than last year. This is the seventh consecutive quarter that there has been a fall in the capital. Given that there has been several years where the city has seen higher price rises than the rest of the country causing problems with affordability this correction is not unexpected.
The outer metropolitan area and the South East also saw declines from last year, but other regions saw some increase. Northern Ireland remains the strongest performing of the home countries with annual price growth at 3.3% (down from 5.8% last quarter). Wales also saw a significant fall in the rate of growth down to 0.9% down from 4.0% last quarter. Scotland picked up slightly with annual growth of 2.6%. England, driven by the declines in the South East, saw the first decline in prices since 2012 with prices down by 0.7% compared with Q1 in 2018.
Robert Gardner, Nationwide’s Chief Economist, commented that as well as the declines in London “More widely, prices across the South of England (and to a lesser extent in the Midlands) are also well above pre-crisis peaks, while those in Northern England, Wales and Scotland are still close to 2007 levels. However, prices in Northern Ireland are still more than 35% below the all-time highs recorded in 2007.”
Stuart Marshall, Managing Director of Liquid Expat Mortgages, commenting on the market says “Since the result of the EU referendum, the falling value of the pound has brought about a renewed interest in financial investment for the UK, especially among foreign investors. Growth is powering ahead in cities such as Manchester and Liverpool although it is flagging or going into reverse in places like Aberdeen and parts of London.”
“At Liquid Expat Mortgages we have seen interest in London dwindling mainly because of the falling yields against higher costs whilst many other cities in the UK such as Manchester, Birmingham and Edinburgh to name a few are proving to be strong performers. Manchester for example is one of the best areas for buy-to-let in the UK, consistently outperforming bank expectations for high rental yields and growth. There are multiple factors driving this growth and the data around it not only seems to consistently corroborate this growth but it would also seem to show that there is no imminent let up in the growth”.
John Emmett of International Mortgage Plans has also seen the impact of Brexit, “The uncertainty of Brexit has resulted in a subdued property sector, particularly in London and the Home Counties. Our core clients, considering a buy to let purchase, are holding off until there is some clear direction as to which path the UK will take in relation to Europe.”
He points out that Brexit has overshadowed the impact of the increased stamp duty thresholds, particularly if the purchase is a second property. For example, purchasing a property at £390,000 would incur a fee of £9,500 if not a first-time buyer and £21,200 if this is the purchase of a second home. Expatriates are having to save more before committing to a purchase. Another consequence of these increased rates is that the casual vendor is staying where they are and improving their home. This has contributed to a shortage of reasonably priced and suitable property on the market.
John believes that “there could be two main outcomes depending on the outcome of the Brexit negotiations. With a possible general election or second referendum there will be continued uncertainty, but with a decision either to leave or to stay, a resurgence in activity.”
Stuart Marshall of Liquid Expat Mortgages comments that “Whilst there is a portion of buyers that believe the uncertain market is not a good time to buy property, we have found that many professional investors and first time buyers alike are finding opportunities to find a property bargain, whether that’s buying at discount Offplan or obtaining a discounted value on a re- sale when taking advantage of other buyers uncertainty”.
“In addition, there has been an expansion of the number of lenders willing to lend UK BTL mortgages for Foreign Nationals, where previously these lenders had restricted their criteria to British Expats only. Mortgage rates are still historically low with Bank of England (BOE) base rate remaining at 0.75% and expat mortgages available to British Expats & Foreign Nationals are currently very attractive with main residential rates from 1.5% and Buy to Let rates from 2.75%.”
The market may be stalled by Brexit, but a decision either way could release the demand and encourage investors to return to the market. The next few months promise to be interesting.