Friday, 24 June 2016

61.3% of Sunderland Voters Voted to Leave the EU - What Now for Sunderland Landlords & Homeowners?’s been announced the UK will be leaving the EU and David Cameron has resigned

As most of the polls suggested a Remain Vote, it came as a surprise to most people, including the City. The Pound has dropped 8% this morning after the City Whiz kids got their predictions wrong and MP’s from the Remain camp are using words like “challenging times ahead”.

Now the decision has been made...what next for the 71,556 Sunderland homeowners - especially the 39,147 of those Sunderland  homeowners with a mortgage?

The Chancellor (as part of the Remain 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, 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, theory that could happen

Sunderland  Property Values
Sunderland property values, which have been flat for the past 4 years, may drop a little in the coming 12 to 18 months – but by 18%!?

I find that way too pessimistic and believe that figure was rhetoric to get homeowners and landlords to vote in a particular way. But the UK property market is quite a monster

Since the last In/Out EU Referendum in June 1975, property values have risen by over 1,900%

That isn’t a typo! Whilst UK 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 10.14% 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 and Sooth-Sayers that predicted soup kitchens in 2008/9 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

However, as mentioned previously, if the value of the pound drops, in the past UK Interest Rates have risen to reverse that drop. However, whilst a cheaper pound will make your jug of Sangria a little more expensive on your Spanish holiday this year and make your brand new BMW pricer .. it will make British export cheaper! Which is great for the economy

Interest Rates
Since 2009, interest rates have been at 0.5% and lots of people have become accustomed to those sorts of levels

So what if interest rates rise .. end of the world? 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) they were 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 Mark 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

In fact they have been printing money (Quantitative Easing) for the last few years (which causes inflation) to the tune of £375bn a month. A bit of inflation because the pound has slipped on the money markets (not too much mind you) might be a good thing?

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, 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 would actually be better off because the more expensive property you would be purchasing would have come down in value (in actual pound notes) by more than the one you are selling!

Sunderland Landlords have nothing to fear, nor do the 11,612 tenant households 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 the evidence, or sound logic choose to PANIC!!!!!  

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 levels 

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 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

You don't need to be an economics graduate to know that demand exceeding supply equals higher prices

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 Sunderland property? It might have a short term wobble…but in the long term - it’s safe as houses

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