Taking advantage of Brexit and the Property Market

The property market it is set to crash, house prices will decrease by 20%, the world will come to an end. We all heard the scare mongering to do with Brexit. I am not here to debate the pro’s and cons, whether we should of left the EU or not, but I am here to discuss how you can take advantage of the property market now that we have decided to leave Europe. Who doesn’t want to start taking advantage of Brexit?

The fundamental issues with the UK property market are not going to change, so taking advantage of Brexit should be relatively straightforward. There are not enough houses to meet the demand for them. Brexit has seen the supply of houses for fall in a number of areas in the UK, yet the long term demand for housing hasn’t changed. If you needed a house before Brexit the chances of you not needing one now are slim. Of course you may delay the purchase of sale of a house due to the uncertainty, yet your mind-set of wanting to move or buy your first house is unlikely to change. The fundamentals will not change.

So what are the fundamentals of the British Housing Market post Brexit?

The bank of Mum and Dad. More and more people are relying on the bank of mum and dad to provide them with their deposit. The average age of a first time buyer has increased to 33, meaning that people are renting for longer.

We don’t build enough houses in this country. 156,140 homes where registered to be built in 2015, this is 25% short of the governments aim. This pushes the supply of houses down, and therefore the price up.

The polarisation of house prices. In Inner London between 2006-2016 house prices rose 105% where as in the North East house prices fell 4%.

Demand is greater than supply. This is the fundamental of any market, of any business. Where supply doesn’t meet demand this is a market failure.

So what might happen to Property Market due to Brexit

There are a number of things that could happen due to Brexit. Let’s be clear the goalposts of Brexit are changing daily and a lot is still to be decided so no decisions can be made on exactly what is going to happen. So the ways we can start taking advantage of Brexit will change depending on what Brexit looks like

Let’s theorise that the UK will see an influx in EU citizens before the UK potentially pulls out of the EU. Each one of these citizens is going to need housing, they are unlikely to buy as their status in this country is anything but assured, they are going to rent. The amount of rental properties on the market is not going to increase it’s only going to decrease or remain stagnant.

This is a prime example of a variable we can’t control and something that may happen and something we can take advantage of.

House prices may fall. Yes, they may fall. None of us know what is going to happen, so far it looks like the property market is remaining fairly stable but this may change. This puts people off buying houses, understandably so. However, this is another factor that we can take advantage of if we know how.

What I want to point out is there are going to be things that happen due to Brexit that politicians can’t predict, that property experts can’t predict. Working towards Financial Independence will allow you to be in the position to take advantage of variables that may change due to Brexit.

If nothing changes, property investors continue to take advantage of the property market due to the fundamental issues.

How can we start taking advantage of Brexit?

There are a number of ways we can take advantage of this situation.

People have been scared, people who are selling their house have been told their property is likely to go down in price. Now, we know in reality that any decrease in price is going to be short term due to the fundamental issues with the UK housing market. However, if you read the Daily Mail and saw the news house prices are about to crash and you received an offer 15% below your asking price you are lot more likely to accept.

I put this to the test, with a fictitious offer (My apologises go out to the people I lied to). Recently I viewed a property worth £385,000, said I had a Mortgage in Principle in place. I put an offer in for £325,000, three days later this was rejected. They took three days to decide, this to me was a great sign that they where tempted. I eventually had an offer accepted for £335,000 for, in my eyes, a property nearly worth £375,000. This is arbitage on a grand scale.

Now the scale of this will differ in each and every market throughout the UK will change, but the fundamentals are the same in most markets. People are uncertain, people who put a house up for sale at this time clearly need to sell the property, people will not be putting their houses on the market to ‘see what they get’, which you get a lot of the time when the market is booming.

The other point I would like to make is that it is not just your standard house buyer and seller who are getting nervous. There are other key groups that are getting slightly nervous.

Property investors are nervous. There is no doubt that the standard property investor is getting nervous and the people who are looking to buy their first or second investment property are even more nervous.

Now I get why, there are no guarantees what’s going to happen to the market, there are number of government policies to put people off property investment. However, the market is providing us with an excellent time to invest.

The second way to take start taking advantage of Brexit and the property market, increased rents.

Property investors have been hit in recent months due to a number of policies designed to put them off buying property. This means there are less and less investment properties being bought, therefore less properties being put on the market to rent. We already have a thesis that demand for rental properties will increase, yet supply won’t. Therefore there is an issue in the market. This will mean more people going for the same property will drive the price of rent up.

To counter this, people will say well shouldn’t you be worried about price decreases? No. Simple answer. Of course I can’t predict the future and I have no idea if property prices will decrease (My opinion in London and the South East yes, the rest of the country a lot less likely), however, property should be viewed as a long term investment.

You don’t worry about your stocks and shares reducing in value by 1% neither should you about any property you own.

If you keep a property for 5-10 years your property will increase in value. If you kept your property for 10 years I would bet it would be worth at least 30% more. This is the issue. Property is not a get rich quick scheme, it allows you to create wealth if you are clever and smart, but not if you think you can do it in a matter of months.

The demand for rental properties will increase

For the first time since the 1930’s the rental market will outstrip the housing market. This isn’t my opinion, this is the thoughts of Countrywide. This should give everyone who is interested in investment property the confidence to invest.

Statistics are showing that the market is changing and people are unsure of whether to move or not due to not understanding Brexit. This will inevitably lead to a huge shift towards renting properties. We already have the lowest level of home ownership ever, and this isn’t about to change.

Owning an investment property is a significant investment, however, if you choose carefully you could be onto a goldmine. House prices will vary, but the amount of money you can rent your house out won’t. These latest statistics show that renting an investment property out is only going to get easier due to Brexit.

Sorry George Osbourne, your policy won’t work.

So What happens if House prices do fall due to Brexit?

We all panic.

No that’s not the answer. The simple answer is firstly we take stock of where we are with our portfolios and what debt we have outstanding against each property. I think it’s vital first and foremost that you know exactly where you are with your properties.

Now when you buy a property you should be prepared for properties to rise as well as fall. However, if you think of property as a long term investment you can take advantage of a dip in the market rather than worry about it.

A dip in property prices allows you to increase the size of your portfolio and the return on your investment. Why would you look to buy a property at the height of the market? You wouldn’t buy shares after they had been go through the roof for six months, you would of bought them six months prior when they where in the doldrums.

If house prices fall, I would advocate increasing your portfolio and buying more houses. The offers you can put in will be way below the true value of the house. Any fall in house prices is an advantage to you and I (The investor).  Where as someone who is looking to sell their house to move will see it as a distinct advantage.

The key point is that if you bought a house in 2009/2010 in London, the peak of the fall in house prices, and you sold it now, you would be laughing all the way to bank. Not only will you have received an excellent rental return for 6/7 years the capital value of the house will have increased significantly.

A fall in house price allows you to buy property at an excellent rate and either flip it in 4/5 years when the housing market has recovered or continue to receive an excellent return on equity due to buying it at a cheaper.

In Conclusion

There are fundamental issues in the UK housing market. One’s that I have taken advantage of for a number of years. Brexit won’t alter this, Brexit may even lead to the issues becoming even more polarised if the supply of houses onto the market falls.

So all in all there are a number of ways to take advantage of the property market and taking advantage of Brexit

Use any fall in property prices to increase the size of your property portfolio

Take advantage of the lack of confidence and knowledge of people selling their homes

Purchase a property for below market value and flip it in 3/4 years time when the market settles down

Increase the rent on your properties due to an increased demand for rental properties

Despite all of my confident predictions that property is a excellent investment. This doesn’t mean you should be blasé and not take your time to investigate your market.  These steps are even more vital than ever. Just because there are a number of things we want to take advantage of doesn’t mean we should throw all of our principles out of the window.

So to conclude. Brexit is a great opportunity for all property investors and we should all be able to start taking advantage of Brexit. If the market doesn’t crash and all is well we will continue as we are doing and make a 45% return in a year . If it does crash we can look forward to reduced supply of rental properties to the market. With increased demand, and cheaper properties to purchase.

So that’s how I think you can start taking advantage of Brexit and the Property Market.

So how are you going to start taking advantage of Brexit? Want any help taking advantage of Brexit and the property market? I am happy to help, feel free to comment or send me an email to james@poundshillingandpence.co.u.

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