What does Brexit mean for the housing market in central Somerset?
The debate over the effects of Brexit very often focuses on London with some commentators predicting London would have a lower standing in the global markets meaning less people would be employed in London and working for less wages.
London will always be a big attraction to foreign buyers who love the political and economic stability and the rich cultural life. I do not believe any of this is threatened by Brexit.
With much of the housing industry supported by workers from outside the UK, some argue that a vote to leave could have a negative impact on the supply of skills to the housing industry directly and indirectly through less appealing exchange rates. This would slow the building of new homes creating upward pressure on prices.
In the run-up to the referendum some elements of the housing market may be subdued as fear of the unknown takes hold. Research has shown that transactions slow ahead of a general election, to be followed by a price spike at the time of the vote and in the following six months. With the short-term uncertainty in the country, big decisions are put on hold and people are less likely to make big-money purchases such as buying a property in central Somerset.
Away from Brussels and far from London how will the 46,157 households in central Somerset be affected by Brexit?
In the six months up to last year’s general election, the average price paid for property in central Somerset dropped by 3.6% compared to the previous six months. The number of transactions in the six months after the election jumped by just over 30% compared to the six months up to the election with a rise in the average price paid of 1.3%. Accepted there may be a seasonal element to these statistics but it does tend to support research on a wider scale.
Now in the run-up to the referendum, I predict that the ‘in’ camp will start to scare homeowners with forecasts of negative equity, while the ‘out’ camp will appeal to the 20-somethings, who’ve been priced out of the property market with the prospect of a new era of inexpensive housing, should the fears of those London estate agents, who believe the bottom will fall out of the market if we do leave, become real.
The principal menace to the central Somerset (and the UK as a whole) housing market could be an increase in interest rates as a result of Brexit, which could theoretically see the cost of mortgages grow swiftly, pricing many out of the market.
For the majority of central Somerset landlords who buy without a mortgage, this won’t affect them. Also, according to the Bank of England, 80.33% of all new mortgages taken out in 2015 were fixed rate. Looking at all mortgages as a whole, according to the Bank of England, 44% of all UK mortgagees have a fixed rate mortgage, but 56% don’t, so if you aren’t on a fixed rate talk to your mortgage broker now – because they can only go in one direction. Upwards.
Whatever decision is made by the electorate of central Somerset and the UK as a whole, over the long-term it won’t have a major effect on the central Somerset property market.
We have seen off the credit crunch of 2008/9 and subsequent property crash, the 1988 Nigel Lawson induced post dual-MIRAS property crash, the 1979 Winter of Discontent property crash, the 1974 oil crisis that stimulated another property crash.
Somerset is the home of Cheddar cheese, cider, the world’s largest festival of performing arts, 11,500 listed buildings and the Wurzels all wrapped up in beautiful coastline and countryside so will always be an attractive destination for those who want to escape to the country. Property prices in the Mendip district are now 28% higher than they were 10 years ago.
A referendum on Britain’s continued membership of the European Union seems far removed from the housing market in central Somerset and whether or not an individual decides to buy or sell. Whether someone wants to move house or not is not going to be influenced by the outcome of the referendum.
Summary
I see little impact on the housing market in central Somerset as any anxiety leading up to the referendum and any Brexit uncertainty would be short-lived, or merely a headwind – whether we want to move house or not makes no difference if we are in or out of Europe.
Come 23rd of June, whatever the result, there might be some short-term volatility in the property market, but in the long-term (and property investment is a long-term strategy) there aren’t enough houses in central Somerset to live in – and that includes either to buy or to rent. Until the UK government solves the problem of not enough new houses being built, the central Somerset property market will be just fine.
Happy voting!
About Tom Morgan
Founder of Jungle Property the multi award-winning letting agent based in Glastonbury, Somerset. I am passionate about property and Glastonbury and about providing the very best advice to anyone who wants the best return on a buy-to-let property investment. For an open and brutally honest opinion on anything in the Glastonbury property market please contact me via tom.morgan@jungleproperty.co.uk
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