It’s 5.50am as I start to type this article and David Dimbleby has just announced the UK will be leaving the EU as the final votes are counted.
.. and now the vote has been made .. what next for the 6875 Teddington homeowners especially the 3763 of those Teddington homeowners with a mortgage?
The Chancellor in the 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. This in turn would raise the cost of mortgages, and therefore lower demand for property, causing a drop in property prices.… and I would say, yes .. that will probably happen.
Teddington property values will probably drop in the coming 12 to 18 months – but by 18% – I am sorry I find that more than a little pessimistic and believe that figure was rhetoric to get homeowners and landlords to vote in a particular way.
The UK property market is quite a monster. Since the last In/Out EU Referendum in June 1975, property values in Teddington have risen by 3306.3%. (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.
If the value of the pound drops (which it did pretty instantly after the Brexit decision), 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.
So 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. Interest rates in the 1986/88 property boom were on average 9.25%, 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 Matt 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. A bit of inflation because the pound has slipped on the money markets (not too much mind you) might be a good thing?
The Teddington landlords of the 2041 Teddington buy to let properties have nothing to fear neither, nor do the 4360 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.
There are undoubtedly 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 Teddington property? It might have a short term wobble… but in the long term – it’s safe as houses regardless.
On a personal level, I am in this for the long haul and I shall continue to invest in property for a return we are never likely to see in a bank account. If property investing sparks your interest and you’d like to know more then please do get in touch. I’m always more than happy to offer advice on email or over the phone.