Will House prices go down with brexit?

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Original post by ajj2000

Not entirely the case. Let’s say a typical landlord has 4 by to lets at 75% ltv. If interest rates rise enough ( and the govt don’t step in to protect landlords) the landlord has 4 properties repossessed unless they can pay the mortgages. It may become 5 houses when their own home is repossessed.

If the houses are sold to other investors it will be at much lower prices - and probably higher loan to value ratios which will make being a landlord a sustainable business again. The current landlords wouldn’t enjoy this however ....

By that logic, houses may get repossessed and property prices go down but this falling house price creates new opportunities ie either people renting now find it affordable to buy assuming they have savings or new landlords take over at lower price points... its an interesting scenario, it means that there is plenty of new opportunities in the property market.,.

Reply 21

ajj2000

Original post by ebam_uk

Well, there is plenty of demand and it’s rare for property to not sell - the question is the price it sells for.

Reply 22

ebam_uk

Original post by ajj2000

Well, there is plenty of demand and it’s rare for property to not sell - the question is the price it sells for.

Have you seen this article:

https://www.bbc.co.uk/news/business-46219904

Properties are taking longer to sell... not good for people in property buying and sell chains.. Also if the price it sells for is less, people who have taken bigger mortgages risk negative equity when remortgaging or selling..

Reply 23

DJKL

If prices drop significantly then imho lenders will seek even larger percentage deposits and mortgage availability will likely reduce making it harder to get a mortgage notwithstanding reduced price.; a hard brexit is great for the cash rich/ those with liquidity.

I would expect to see a freeze up take place similar to 2008. I would also expect a vast reduction in voluntary sellers, the market will more arise from those losing their incomes and becoming forced sellers.

Even executry sales will reduce, if say parental properties are not debt encumbered and no IHT to find (or other assets available to deal with IHT) a number of children will become landlords awaiting a maket recovery. ( Human nature tends to make peopl;e reluctant to sell at a "perceived" loss, so if house was worth £500k before Brexit, and only would realise £350k after, if not forced to sell people will not sell)

Reply 24

ajj2000

Original post by DJKL

I would agree. The area which could create a different outcome to 2008 would be interest rate rises (they were reduced in 2008).

Reply 25

Caner53

If the things go wrong, unemployment, inflation and interest rates will be raised, it will be harder to take loan, so there will be less clients and due to these conditions house prices will go down. I suggest to check these two links:
https://www.theguardian.com/money/2018/oct/01/wait-buy-brexit-house-prices-property
https://tranio.com/articles/uk-election-results-what-does-this-mean-for-the-housing-market_5340/

(edited 5 years ago)

Reply 26

DJKL

Original post by Caner53

It all depends upon the individual's ability to access funds to purchase whilst the economy is being kicked all over the place.

No bank, faced with collapsing house prices, with existing borrowers going into negative equity, and with existing borrowers at greater risk of unemployment, is going to be lending to new borrowers on anything like current terms.

The catch is that on paper collapsing house prices favour first time buyers but only on the assumption all other things remain the same; they, in such a scenario, will not.

Unemployment and inflation will not "be raised" they will likely rise, they are both not directly controlled by either B of E or HMG they are instead consequences of their actions and the impact of the wider world economic situation.

But it is all self levelling. those who might have sold will not (humans hate perceived losses) , supply drops, demand drops, eventually new equilibrium.

In the transition No Deal Brexit (If that is what we get) will dislocate the market, will bankrupt some, but will be Black Friday for those currently sitting in the wings with mountains of liquidity to snap up those sales that do come from the distressed sellers; as always the FTB is going to be squeezed out by tight money and the winners will be those who have liquidity.