04 Dec Our View – Mark Carney’s Assessment of House Prices after Brexit
In a recent Guardian article the Bank of England governor warns cabinet of high unemployment and sharp house price falls. These house price falls that he is predicating are as much as 25-35% over three years, comparing the outcome of a no-deal Brexit with the fallout from the 2008 financial crash.
Our stance at Thirlmere Deacon is that we respectfully disagree with Mr Carney’s comments and we’ve seen absolutely no let-up in the interest from investors both foreign and domestic.
The fundamentals remain, the government have historically been woefully short on the housing supply and are still falling short today. The current requirement in a recent report suggested over 340,000 new homes are required every year from now until 2031 to meet the current demand, and under supply of over 4m properties in the UK. Currently the rate of building is in the region of 200,000, further increasing the gap. The demand is still very much present and therefore we will continue to attract interest from savvy investors. Economics are simple – when the level of demand far outstrips the level of supply, prices increase.
The fact that the likes of Barclays, for example, have chosen this month (Sept 2018) to announce their £1bn fund to help tackle the housing deficit, is a real beacon from one of the world’s leading financial institutions. This is a clear message that we still need quality homes up and down the country and this would not have come to fruition had their expert analysts thought that the market would decline.
The UK, with some of the most secure property legislation in the world, is still seen as a very safe bet for many foreign investors with or without a Brexit deal looming. Historically prices have always doubled every 10-12 years and we at Thirlmere Deacon see this positive trajectory continuing. With the Pound Sterling currently weak there doesn’t seem to be any reduction in interest in the UK Buy to Let property market. Although it may appear to be ‘dark times’ with the low value of the UK currency, the economy, and indeed property market is still buoyant. The majority of our investors (around 60%) are based overseas. There has been no let up in investor appetite or interest since Brexit, in fact many see it as an opportunity as they will not only be making an attractive yield, and growth in the value of their asset, once the pound recovers over the next 3-5 years, they will essentially be making a further 20-30% on their investment due to investing now when the pound is 20-30% lower than it’s previous values.
In summary, the fundamentals remain. As long as there are people, there will always be a need for housing. The population is increasing at a faster rate than properties can be built. It doesn’t take an expert to know the outcome of this scenario…
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