How to mitigate the effects of Brexit on the value of your home

In this article we consider some of the potential reasons why an extension or full house renovation project your home now is advisable, before the implementation of a Brexit deal or no deal action plan by the Government after March 2019.

 

Brexit concerns

After the Referendum, concern for house price deflation was concentrated in the capital following the vote to leave the EU. This was due to the outlook for prices in 3 – 12 months time being the lowest since June 2016.

Brexit was highlighted by surveyors as a key concern for buyers in September especially given the uncertainty of a Brexit Deal or No Deal senario. Also, estate agents were saying that the unknowns surrounding Brexit are weighing on the property market as the March 2019 deadline approaches.

In September a warning was issued by the Bank of England Governor Mark Carney, that a disruptive no-deal Brexit could cut 35 per cent off house prices adding to the market jitters. This senario is an extreme and ultimately any effect of Brexit on house prices & mortgages will depend on the details of any deal and its repercussions.

 

What effect is Brexit having on markets now?

Here are some factors for households to consider when deciding whether Brexit should affect their decisions on house purchases and sales.

The London housing market has slowed with prices falling by approx. 0.7% according to the Office for National Statistics. Also, transaction levels in the capital are down 20 per cent year on year, said Neal Hudson of Residential Analysts.

Notably, property data company LonRes has stated that the number of homes being placed on the market for £2m or more was down 25 per cent in the third quarter of 2018 compared with a year before.

Image – Yahoo News

With London being one of the UK’s most expensive markets, the ability to buy is becoming much reduced as loan to income ratios are stretched just about as far as they can go. This worry for buyers actually being able to get funding for their desired purchase is being aggravated further by worries about Brexit. This has led to a dramatic slowing in house price growth.

In London Brexit is being felt as more of a direct issue that the rest of the country as uncertainty over jobs was also fuelling fears.

 

Not all bad news

The good news is that the weakened economy is making a London property purchase from foreign buyers look much more appealing.

If prices are falling in your area its worth hanging on to wait and see what the ultimate outcome of Brexit will be.

One current benefit of the Brexit process, is that low interests remain and are set to continue at low levels and many borrowers are opting for 5 year fixed deals.

 

Now is the time to invest in your house

If you are one of those with a fixed term mortgage, one way to maximise the return on a delayed sale is to complete a renovation or extension project adding substantial capital value to your home. At the end of the 5 year mortgage deal you may then have a property that is worth significantly more than the the value when the lending was taken out.

One possible measure that the Bank of England may have to take once the Brexit deal is completed is an increase in mortgage rates to curb inflation.

Taking out your additional borrowing now to complete the extension or refurbishment works at a lower rate may therefore be beneficial, as once the works are complete and you are ready to sell the impact of cost of the additional borrowing is minimised.

Long term slumps in the London market are rare, so, be ready for them to return to their previous rates of growth with a property that will appreciate faster due to a recent extension or refurbishment completed by Edge2.

 

Contact Julian at Edge2 to discuss how he can support creating a refurbishment or extension project that will truly add value in these turbulent times. Uncertainty? Brexit deal or no deal? You can at least take steps to bolster your own financial situation.

Phone: +44(0)207 112 9081

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