How BREXIT Will Affect Leicester Property Prices
15th December 2018
When the UK announced its intention to leave the European Union, it came as a shock to the country as polls suggested the country favoured remaining within the EU. Leicester voters opted to remain with a majority of 51% but, the overall vote was in favour of leaving with a majority of just over 52%. This sent shock-waves through the global economy which, due to the sharp fall in the value of the pound, impacted our local economy here in Leicester too. Two years on, how has BREXIT affected the Leicester property prices?
We have seen mortgage lenders devalue properties, causing buyers to potentially lose thousands of pounds if they're unable to make up the shortfall between the sale price and the lender valuation as sales up and down the country fell through; this pushed property prices down overall but property prices, especially in Leicester, have slowed in growth as buyers anticipate further value decreases as we exit the EU; political and economic uncertainty resulting from the leave vote isn't helping either.
In some places of the UK, especially down south, property prices are looking like they'll fall off a cliff edge as worried owners slash asking prices in a bid to sell their home first, before the market is flooded with properties as the government turns their sites on landlords, many of whom are exiting the market.
A poll, conducted by the National Association of Estate Agents (NAEA), which surveyed almost 700 estate agents up and down the United Kingdom, suggests 8/10 properties sold last month were sold for less than their original market price just two months after the vote with Leicester seeing property prices fall by 0.9%, but, what's the state of the market now?
How is Brexit impacting Leicester property prices?
Leicester property prices were predicted to continue to drop for the coming 12 to 18 months by some very prominent estate agencies in Leicester, backed up by numerous letting agents in Leicester but some, like Harry Albert Lettings & Estates, have recognised a lot of opportunities arising from the uncertainty brought about by BREXIT.
According to data provided by the land registry, in June 2016, just before the vote to leave the UK, the average house price was £148'119 in Leicester and, although we did see some sharp drops in house values in Leicester, it doesn't appear to have been the end of the house price boom because today, the average house price is £174'815, an increase of £26'696 or 15.27%; this is quite significant over a 2 and a half year period. So, what does this mean?
The International Monetary Fund (IMF) forecasts a sharp decline in house prices directly resulting from BREXIT, which doesn't look good for homeowners and vendors looking to sell their properties in Leicester, but will naturally be welcomed by those looking to purchase homes. However, when we take the land registry data into consideration, should first-time buyers wait before buying a home in Leicester and should landlords with properties in Leicester sell up? We'd say no to both. First-time buyers can score a bargain right now as vendors get nervous about their investments and choose to sell rather than take the risk; buyers have more negotiating power today than they ever had before the referendum or up until now. For those willing to take the risk and hold onto their properties, they should benefit from massive capital gains - even if property prices do fall slightly, due to the trajectory in which Leicester house prices trends have been going over the years, it's likely we will weather any storm and house prices will recover within 4-10 years.
Great News for Property Investors and Landlords
As people sell their home in Leicester and wait for property prices to fall, which is unlikely given the current data we have to hand, guess where they'll live? In rented accommodation. This puts buy to let investors in good stead in attracting new tenants to properties they can acquire at below market value, cash-rich buyers will have more bargaining power than those relying on mortgage lenders to help them make the purchase but even those reliant on mortgages, due to mortgage devaluations in Leicester earlier in the year, this can still be used as a strong bargaining chip; especially in more deprived areas like the Braunstone, New Parks and Saffron Lane estates where there are large groups of homeowners looking to sell three bedroom properties for as little as £120'000 which have huge potential to be brought up to minimum energy efficiency standards and let for strong yields of 6% or more.
Because of increased rents, primarily from increased costs of being a landlord, the deposit cap of 5 weeks (where the government previously promised 6) and the tenant fee ban, it's a win-win all around but, we mustn't get ahead of ourselves!
New Housing Laws Coming In Force in 2019
There are now more than 150+ laws that landlords need to adhere to when letting and managing their own properties, at Harry Albert Lettings & Estates, we've commissioned software which monitors updates coming out of the House of Commons and maintaining an active relationship with departments responsible for legislative changes, as well as local authorities who have powers to implement their own local bylaws to give us first-hand knowledge of upcoming law changes. Self-managing landlords are finding it more and more difficult to turn a profit and remain compliant with increased legislative demands without the assistance of a reputable, affordable letting agent like Harry Albert Lettings & Estates; so, whilst it is still lucrative to invest in property, even with the uncertainty caused by BREXIT, it is advisable to partner with an agent like ourselves because the financial consequences of not adhering to the new laws could find you on the receiving end of hefty fines or imprisonment. Housing law will be better policed into the new year as the government announces plans to introduce specialist housing courts and grant more powers to local authorities to grant banning orders or force compulsory purchase or confiscation of properties that are being mismanaged by landlords and rogue agents.
Give us a call today on 0116 321 4970 and see how we can help you to maximise your return on investment in Leicester.