Could the UK’s historic exodus be an opportunity for homeowners in Britain?
Irrespective of one’s convictions on the wisdom behind the UK’s 2016 referendum to leave the European Union, the economic impact is nonetheless difficult to predict. However difficult, informed economic forecasts are necessary in order to be adequately prepared for Brexit’s impact, whatever it may be.
This volatility is perhaps no more apparent than in property values. Uncertainty in the prospect of a no-deal Brexit has already caused home prices in the UK to drop significantly particularly in London where foreign investments drive a major portion of the market. The question for many homebuyers and homeowners is whether this is good or bad.
Predictions of the rate by which UK property values will drop vary greatly. Modest predictions suggest a 6 percent decline, while the Bank of England forecast a much more dramatic rate of 30 percent. Still others are calling for even higher percentages. Unless Brexit-related consumer confidence remains high, thus stabilizing the market, nearly all models point to a decline.
Forbes recently suggested that as property values fall (pre- and post-Brexit), Britain’s housing market will remain desirable as “low supply will mitigate any steep descent in prices.” In other words, opportunity exists for increased home purchases in light of such potential property “bargains.” Add to this that mortgage approvals in the UK hit a two-year high just this past summer, indicating that the property market is becoming more competitive as Brexit approaches.
While property values may be increasingly ripe in the UK, purchasing a home means more than simply buying a bullding in which to live. Various associated taxes notwithstanding, renovations and cosmetic improvements to kitchens, bathrooms, etc. need to be factored in, making the true cost of home ownership greater than the mere property value at the time of purchase. These added expenditures can increase the total cost of home ownership by more than 20 percent over the price of the property alone according to analysis conducted by soak.com, and must be taken into account by the savvy home buyer.
Brexit may be good for the UK housing market, but before buying that London townhome or country cottage, do your homework first.