It was a very close call in Watford with just over half of the voters putting a cross in the leave box at the polling stations yesterday but today it has been announced that the UK will be leaving the EU.  The final votes are in and it has come as quite a surprise as the polls suggested we’d have a Remain Vote.
The pound has already taken a sizeable hit and is set to be one of the biggest decreases on record, the city whiz kids have got their predictions wrong and MP’s from the remain camp are using words like “challenging times ahead”.
…and now the vote had been made what’s next for the 34,385 homeowners in Watford especially the 20,367 with mortgages?
During the remain campaign The Chancellor 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.… and I would say, yes .. that will probably happen. In some areas.
Watford Brexit
Watford Property Values
Watford property values may possibly drop a little in the coming 12 to 18 months – but by 18% is hugely unlikely – especially if you consider the drop during the credit crunch was less than that in Watford.  I believe the 18% figure was simply more scaremongering to get homeowners and landlords to vote in a particular way.
Looking back to the last the last In/Out EU Referendum in June 1975, property values in Watford have risen by 2195%
(That isn’t a typo) and whilst property prices did drop in Watford between the peak of 2007 and bottom of the market in 2009, when one compares property values today to the previous all-time high of 2007, (the period before the financial crisis of the Credit Crunch of 2008/9) .. they are still up 18% 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 were panicking in 2012/3/4 that the housing market was a runaway train.
Now the same Credit Crunch doom-mongers 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 and we need a roof over our head.
Interest rates
Interest rates have been stuck at 0.5% since 2009 and most of us have become ‘used’ to that sort of level. So what if they rise? Will it be the end of the world if they do?
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%. Some of those 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 raising interest rates causes deflation – which is the last thing the British economy needs at the moment.
And 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) more than the one you are selling.
Watford’s landlords of the 8,884 buy to let properties have nothing to fear nor do the 20,947 tenants living in their properties.
Buy to let is a long term investment. Something I constantly explain to investors. There may also be some bargains out there in the coming months as people are likely to panic (I know I’ll be keeping my eye out for them!)
Even if we pull up the drawbridge at Dover 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.
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 Watford property? It might have a short term wobble… but in the long term -it’s safe as houses regardless.