Brexit Could Signal Property Price Crash in UK

Brexit Could Signal Property Price Crash in UK

If you have invested in property in the hope of boosting your income or pension, then a recent independent analysis will make for miserable reading.

This report is predicting that house prices in the UK are set to crash spectacularly on the back of a Brexit vote.

The problem for property owners, particularly those in the buy-to-let sector, is that prices have already begun to fall long before polling day.

Many buy-to-let investors have good reasons to be fearful. This is because nervous lenders will demand an injection of cash to cover the decrease in equity caused by falling prices.

If you are concerned that you might be facing that painful situation, then R&T Property Solutions can help.

We are based in Glasgow but we will buy property all over Scotland.

R&T Property Solutions is an independent company which sees property as a long term investment.

Consequently, variations in the market, large or small, long or short term, will not unduly influence our approach.

We are interested in hearing from anyone who is considering selling their property – whether it is a single flat or a large portfolio.

We don’t believe in messing our clients around and so a deal with us can be completed from start to finish within a week.

And if you want cash in a hurry we can easily accommodate you.

So what do the experts believe is going to happen?

Britain leaving the European Union — known as a Brexit — will not only kill property prices, it will also drag the UK banking sector down with it, according to analysts who were interviewed by Business Insider.

The experts at research house, Bernstein, reckon the negative impact of a vote to leave the European Union will be much worse than anyone has anticipated.

George Osborne warned in May that if it happens then house prices could crash by 10% to 18%.

However, Mark Burrows and his team at Bernstein say it might be much worse. They think property prices could crash by as much as 30% — nearly double the Chancellor of the Exchequer’s worst-case expectations

To add to the doomsday scenario, a report in The Financial Times states that signs of faltering demand in the housing market are prompting estate agents and analysts to suggest England’s house price boom may be ending.

And remember, whatever happens in England usually finds its way to Scotland a short time later.

The FT quotes Paul Smith, chief executive of the Haart agency — which has more than 100 branches — who said: “We believe the nation has now neared the limit in terms of price rises.”

Inquiries declined in April at their second-highest rate since 2008, according to the Royal Institution of Chartered Surveyors — a trend that Mike Prew, equity analyst at investment bank Jefferies, said “signals this slowdown could morph into a period of sustained house price deflation”.

Drops in this Rics measure are strongly correlated with price falls about a year later, Mr Prew added. “The balance of surveyors expecting higher house prices 12 months ahead has also collapsed, suggesting something more than just short-term factors.”

The article stated that mortgage approvals across the country dropped 8.6 per cent in April, far steeper than analysts had expected.

This was partly down to the aftermath of a demand surge in March as buy-to-let investors rushed to beat a new stamp duty surcharge, while caution over the June referendum on European Union membership also played a role.

But broader factors are also at work, including slowing economic growth and price rises that have stretched affordability to breaking point.

Richard Donnell, director of research at Hometrack, an analysis firm, added: “When sales volumes fall back, it is agents that start to re-price the market to get volumes back, in a process that takes six to 12 months.

“They let vendors know that they need to be more realistic if they want to sell, taking on new instructions at lower prices.”

Henry Pryor, a buying agent, said he was aware of homes remaining on the market for three to four weeks without a single viewing.

“How do you persuade people to buy something today that they think will be cheaper tomorrow?” he said.

Robin Hardy, analyst at Shore Capital, said the market was also plagued by “mortgage zombies”, defined as “growing numbers of potential movers struggling with a lack of equity due to the various types of assistance buyers received . . . when they entered the market.

“Parental gifts, help-to-buy or other shared equity loans and long-dated mortgages all hamper the creation of equity. We see growing numbers of ‘mortgage zombies’ primarily from those who were first-time buyers at any time in the last five to seven years.

It’s quite clear that at the moment there are precious few, if any, positive influences on house prices.

And even if the UK votes to remain in the EU it could be some time before the market recovers from its current jitters.

If you think all of this uncertainty means it is time to cash in your investment and get out of the property business, then give us a call.

Our team of professionals will always provide you with our best advice and inside knowledge of the Scottish scene.

Phone us now on 0141 636 0521.