A question many Glastonbury property owners are asking right now is how a hard Brexit will affect the value of their property. A lot of pessimism surrounds the possibility of a hard Brexit so it is only natural that property owners in Glastonbury will be asking the question.

Well I don’t have a crystal ball to be sure what will happen ‘if’ we have a hard Brexit in March 2019 but here are my thoughts…

It seems an age since the EU referendum on 23rd June 2016 after which many predicted a melt-down in the property market. The good news the crash in the Glastonbury (and national) property market many predicted has not happened. However, the growth in property values has been subdued since that historical date in 2016 with the price paid for Glastonbury property levelling off in 2017.

Regardless of what some local estate agents may be telling you, the Glastonbury property market has seen a drop in transactions since 2016, but before we hit the panic button let us look at what has happened to Glastonbury property prices since the Brexit vote?

Glastonbury property prices have risen 23% since the EU referendum

The average price paid for property in the last 12 months in Glastonbury (to 25th September 2018) was £288,258 – just over £20,000 up on the prices paid in 2017. The projected number of transactions for 2018 is just 419, down from the high of 614 in 2016 and 527 in 2017

So, it appears the EU vote hasn’t affected prices paid so far, however, if there was a large economic jolt, that could be a different game, yet how likely is that?

The property market is mostly influenced by interest rates and salaries

A hard Brexit would subdue wage growth, yet the level of the change will depend on the undetermined type of Brexit deal (or no deal). If trade barriers are imposed as part of a hard Brexit, imports will become more expensive, inflation will rise, and growth will fall, although at least we are not in the Euro, meaning this could be tempered by the exchange rate of the Pound against the Euro. In plain language, a hard Brexit will be worse for house prices than a deal.

So why did the Governor of the Bank of England suggest a hard Brexit would affect house prices by up to 35%?

Just nine years ago we went through the global financial crisis with the credit crunch. Nationally property values dropped in value by 16% to 19% over an 18-month period. Looking at the graph, if we had a similar percentage drop, it would only take us back to the property value levels of 2015.

And let’s not forget that the Bank of England introduced some measures to ensure we didn’t have another bubble in any future property market. One of the biggest factors of the 2009 property crash was the level of irresponsible lending by the banks. The Bank of England Mortgage Market Review of 2014 forced banks to lend on how much borrowers had left after regular expenditure, rather than on their income. Income multipliers that were 8 or 9 times income pre-credit crunch were significantly curtailed (meaning a bank could only offer a small number of residential mortgages above 4.5 times income), and that banks had to assess whether the borrower could afford the mortgage if interest rates at the time of lending rose by three percentage points over the first five years of the loan … meaning all the major possible stumbling blocks have been mostly weeded out of the system.

So, what will happen next?

My theory is that many Glastonbury homeowners will wait until 2019 to move – until at least March 2019, meaning less choice for buyers. For Glastonbury landlords, Glastonbury tenants are also likely to hold off moving until next year, although I suspect (as we had in the run up to the 2015 General Election when it was thought Labour might get into Government), during the lull, there could be some Glastonbury buy-to-let bargains to be had from people having to move (Brexit or No Brexit) or the usual panic selling at times of uncertainty.

Brexit, No Brexit, Hard Brexit … in the whole scheme of things, it will be another footnote to history in a decade. We have survived the oil crisis, 20%+ hyperinflation in the 1970’s, mass unemployment in the 1980s, interest rates of 15% in 1990’s, the global financial crash in 2009 … whatever happens, happens. People still need houses and a roof over their head. If property values drop, it is only a paper drop in value … because you lose when you actually sell. Long term, we aren’t building enough homes, and so, as I always say, property is a long game no matter what happens – the property market will always come good.

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