First Time Buyer - Brexit Implications

mixablemixer

Hi,

I am finally in a position to buy my first house. However, with a 'no-deal' Brexit possibly taking place at the end of the month, I am wondering whether anyone knows/expects house prices are due to fall or rise as a consequence of 'no-deal'? If a rise/fall will be due, will it be substantial enough to affect the decision to buy a house now or to wait?

I want to avoid a scenario where I buy now and the value of the house falls by 5% immediately after as a consequence of Brexit.

I don't want this post to get political.

ACG

A lot will depend where in the country you are - I dont know about specific areas, but London and the South East has seen a big hit for us. The midlands and the North appear to be doing as well (if not better) as ever.

Do you live in an area heavily reliant on exports or imports (var industry for example)?

Also the other side to this is how much it will cost. I was at an event about 2 months ago and there was an economist from a bank there. He was basically saying if Brexit happens, expect rates to remain the same or even potentially 0.5% drop (making mortgages cheaper potentially), if Brexit does not happen, you may find there is a rate rise of 0.5%. He did not say how soon after the event but could be in November.

Nobody really knows.

Personally if I were looking at buying, I would crack on if something I like pops up, but I would not exchange until after maybe the 10th November as I would want to get an idea of what sort of fall out there will be after it happens/does not happen. Realistically, the normal process would take maybe that long anyway so you would not be holding anything up - although you may be incurring legal/valuation fees.

CharlesD

Hi Mixa,

My partner and I are going through our first house purchase at the moment, and did debate the Brexit implications for a while (driven partly by the fact that my job is non politically Brexit / legal related so I'm neck deep in Brexit 5 days of the week).

There are a few ways you can look at this.

• From the perspective of mortgages
  As you probably know from your research, rates are at an all time low at the moment. If we leave the EU without a negotiated agreement, they could drop further still, but realistically, how much further can we expect them to go? They are fantastic at the moment.
  However if we secure some form of transition period through a withdrawal agreement, the Bank of England has hinted it might start raising rates again.
  On balance, and in our case, we felt that it was probably better to seize mortgage rates now. In fact, we have managed to get our mortgage rate lowered two times already between getting the agreement in principle and reaching exchange.
  
  Mortgage rates change very quickly, and our broker said he has seen several providers increase their rates recently.

[*

]From the perspective of house prices
As ACG wisely points out above me, location is an important consideration if projecting performance in the housing market is important to you because it is hyper localised - so looking at national trends is likely to not be very helpful.

London has been in trouble for a while now, but in Wales and Scotland for example the market has been performing well (though again, looking at a specific local area, or even a street may paint a different picture).

How long do you plan to live in the property? Are you buying a home for the long term or an investment you will want to sell on after 5 years? If its the former, then maybe worrying about the housing market in your area isn't a factor you should become obsessed with.
If the housing market is under-performing where you are, there are other ways you could consider beating the market to add value to the house over time as well.

Overall I would recommend thinking more about why you are buying and use that to guide you.

• Impact of Brexit
  I would recommend critical scepticism in trying to predict what the impact of Brexit will be on the housing market generally. The Brexit space is very very volatile and there is a ton of inaccurate, misinformed info out there, as well as a lot of hotly politically motivated stuff, much of it from official sources. So it is very difficult to make any sort of assessment.
  
  Bearing this in mind - what is your timeline? The impact of Brexit overall is going to be a lengthy one, regardless of the outcome (though of course to varying degrees depending on what happens). Do you really want to put your life on hold while the politicians argue in circles?

You say you don't want to buy a house and see the value immediately fall by 5% - others may know more about the housing market than me, but I imagine it would be difficult to imagine the market having such an immediate reaction to this type of disruption. If you plan to keep the house long term, it may well recover what is lost in the immediate aftermath of Brexit.

It might be wise in some circumstances to at least wait until around 17-20 October with the EU Summit and the Benn-Burt Act (though maybe not if you see an amazing property that could be snapped up!).

But we could well see the situation moving into another short extension to the process. However the threat of leaving without an agreement could well continue to lead to short extensions, or a longer one - but at the end of these periods the threat of transitioning to new constitutional, regulatory, and market conditions will return.
Indeed even if we leave with an agreement, the risk of a no-deal (though this time referring to a different deal) could return at the end of the transition period and we could be looking at another wave of uncertainty / disruption.

So you could find yourself debating similar things 2-3 years down the line if you wanted to wait and see.

amnblog

Unless you plan to sell when the value falls 5% you might be focusing on the wrong issue here.

If you want to buy your own home, do so.

Second guessing this mess is a fruitless task.

zesh90x

The same debate I was having with myself for a little while before dipping in and going for it....

If you can afford to get a property, go for it. No one has a crystal ball and is able to predict the future accurately.

Prices may come down, price may even go up, assuming its going to be your principal private residence, short term fluctuations will have no real impact on you, the housing market always correct itself, and in a ten year cycle there generally always tends to be an opportunity to break even if not profit.

That's my two cents worth. :cool:

davidmcn

mixablemixer wrote: »

If a rise/fall will be due, will it be substantial enough to affect the decision to buy a house now or to wait?

Wait...until when? Even if Brexit "happens" on 31 October, it will take months to know for certain even what the immediate impact on the property market has been (if any - everyone has known for over three years that there's a high risk of some sort of Brexit happening), and the economic effects will unfold like a slow-motion car crash [insert preferred metaphor to suit political belief] over months/years. How would you know that you had reached a better time to buy?

SouthLondonUser

amnblog wrote: »

Unless you plan to sell when the value falls 5% you might be focusing on the wrong issue here.
.

What if the OP needs to remortgage after 2-3 years?

OP, where are you buying and at what LTV – how large is your deposit?

If your LTV is not too high, then you should be able to remortgage in 2-3 years even if your property will be worth a bit less. If you are on a 95% LTV, it would of course be much more of an issue.

Where are you buying? There are certain areas / types of properties which I wouldn’t buy, even if I won the lottery. Places like towns with a large presence of a car manufacturer or another industry which exports to Europe; super-prime central London (I wouldn’t buy a £5million house in Kensington now even if I won £20 millions at the lottery as I believe that market is too inflated); very new, modern (especially riverside) London flats and penthouses – many have struggled to sell, I do wonder if too many have been built, and I have the impression they tend to be liked more by foreigners than by Brits.

But I would consider a 2 to 3 bedroom maisonette or terraced house, below £1 million, in a well-connected part of London’s zone 2 or 3.

These are of course my opinions and clearly not everyone will agree…

The key piece of advice I’d have for you is: do your research. I know it sounds banal, but install the property tracker Chrome add-on, which shows you the price reductions for each property on rightmove. Set up a spreadsheet where you track the properties you are interested in. 2 to 4 months after a sale, you’ll see the actual price on the landregistry and the rightmove websites.

If you do that, you will get a clearer picture of which properties tend to sell, in how long, for how much, and of which don’t.

Prices may go x% down in the UK, but you are not buying a well-diversified portfolio of thousands of properties all over the country – you are buying a single property in a very specific area so it’s on that specific area that you need to do your homework.

You should also run some numbers based on your specific situation and calculate, for example, the cost of buying vs renting over, say, 3 to 5 years. Note that the cost doesn’t mean the mortgage instalment vs the cost of renting; capital repayments are money you pay to yourself, that’s not a real cost.