59.9% of Plymouth Voters voted to leave the EU – What now for the 77671 Plymouth Landlords and Homeowners?

EU Plymouth vote graph

It’s 5.50am as I start to type this article and David Dimbleby has just announced the UK will be leaving the EU as the final votes are counted. As most of the polls suggested a Remain Vote, it came as a surprise to most people, including the City. The Pound dropped 6% initially this morning after the City Whiz kids got their predictions wrong and MP’s from the Remain camp are using words like “challenging times ahead”.

.. and now the vote has been made .. what next for the 56798 Plymouth homeowners especially the 31407 of those Plymouth homeowners with a mortgage?

The Chancellor in the campaign suggested property prices would drop by 18%. Using Treasury estimates, their method of calculating this was tenuous at best, but focused around the abrupt and hasty increase in UK interest rates, which in turn would raise the cost of mortgages, and therefore lower demand for property, causing a drop in property prices… and I would say, yes… that will probably happen.

Plymouth Property Values

Plymouth property values will probably drop in the coming 12 to 18 months – but by 18%!!?? – I am sorry I find that a little pessimistic and believe that figure was rhetoric to get homeowners and landlords to vote in a particular way. The National  Association of Estate Agents have this morning suggested a 6% drop by 2018 and that is more in line with what you’d expect. Political events like this make you look at figures quite closely and has reminded me that the UK property market is quite a monster.

Since the last In/Out EU Referendum in June 1975,

property values in Plymouth have risen by 1929.2%

(That isn’t a typo) and whilst property prices did drop nationally by 18.7% between the peak of 2007 and bottom of the market in 2009, when one compares property values today in the country, compared to that all-time high of 2007, (the period before the financial crisis of the Credit Crunch of 2008/9) .. they are still up 10.14% higher.

Another Credit Crunch?

And so, notwithstanding the Credit Crunch, the worst global economic outlook since the 1930s and the recession it brought us, a matter of a few years later, the Government were panicking in 2012/3/4 that the housing market was a runaway train.

Now the same Credit Crunch doom-mongers and Sooth-Sayers that predicted soup kitchens in 2008/9 are predicting Brexit meltdown. Bad news sells newspapers. Stock markets may rise, stock markets may fall, yet the British public continued to buy property in 2009/10 and beyond. Aspiring first time buyers and buy to let landlords dusted themselves down, took a deep breath and carried on buying… because us Brit’s love our Bricks and Mortar… we need a roof over our head.

However, as mentioned previously, if the value of the pound drops, in the past UK Interest Rates have risen to reverse that drop. However, whilst a cheaper pound will make your pint of Sangria a little more expensive on your Spanish holiday this year and make your brand new BMW pricer… it will make British export cheaper! Which is great for the economy.

Interest rates

… and what of interest rates? Since 2009, interest rates have been at 0.5% and lots of people have become accustomed to those sorts of levels. So what if interest rates rise… end of the world? Interest rates in the 1986/88 property boom were on average 9.25%, the 1990’s they were on average around 6.5% and uber-boom years (when UK property values were rising by 20% a year for three or four straight years across the UK) .. 4.5%. Many of you reading this who are in their 50’s and older will remember interest rates at 15%.

But I suspect interest rates won’t rise that much anyway, as Mark Carney (Chief of the Bank Of England) knows, raising interest rates causes deflation – which is the last thing the British economy needs at the moment. In fact they have been printing money (aka Quantitative Easing) for the last few years (which causes inflation) to the tune of £375bn a month. A bit of inflation because the pound has slipped on the money markets (not too much mind you) might be a good thing?

Whilst property values might drop in the country, they will bounce back. It’s only a paper loss… because it only becomes real if you sell. And if you have to sell, again as most people move up market when they sell, whilst your property might have dropped by 5% or 10%, the one you want to buy would have dropped by the same 5% to 10%… and here is the best part – (and work your sums out) you would actually be better off because the more expensive property you would be purchasing would have come down in value (in actual pound notes) than the one you are selling.

The Plymouth landlords of the 4,701 Plymouth buy to let properties have nothing to fear either, nor do the 11,612 tenants living in their properties.

Buy to let is a long term investment. I think there might even be some buy to let bargains in the coming months as some people, irrespective of evidence, panic. Even if we pull up the drawbridge at Dover and immigration stopped today, the British population will still increase at a rate that will exceed the current property building level. Britain is building 139,600 properties a year, but needs according to the eminent ‘Barker Review of Housing Supply Report’, the country needs to build about 250,000 properties a year to even stand still, and as the birth rate is increasing, the population is living longer and just under a quarter of all UK households now are occupied by a single person demand is only going up whilst supply is stifled. Greater demand than supply equals higher prices. That is definitely a fact.

So, what will happen next?

Well, there are many challenges ahead. The country has spoken and we are now in unchartered territory – but we have been through a couple of World Wars, an Oil Crisis, Black Monday, Black Wednesday, 15% interest rates and a Credit Crunch… and we survived!

 

And the value of your Plymouth property? It might have a short term wobble… but in the long term -it’s safe as houses regardless.

Internet V Traditional Estate Agency and the rise of the machines

I was reading in an estate agency magazine last week about the ‘Rise of Machines’ and whether the internet estate agency model could really replace the high street agent. It reminded me of a conversation that I had with a vendor last week.

The conversation started off with me waxing lyrical about how we market property and why we do it in a certain way. I’d had two very similar conversations earlier on in the day but this time it went completely off track when the vendor asked me how I was going to vote in the EU referendum.

Personally, I’m undecided yet I see plenty of positives for sticking with the status quo. But what if it was better spreading our horizons a little bit further? For a business, there lies the eternal question. Stop a dozen people in the street and you won’t find a universal answer to the EU in / out question. But maybe that’s down to all this constant verbal diarriah we hear everyday about the pros and cons. Politicians who tell us made up figures based on what they think we want to hear? In business as in everyday life they’ll always be someone who prefers shop B to shop A. In business, we need variety, different options, constant innovation and a need to adapt to what the consumer wants.

I got back to reading through the article and amongst the words ‘online’, ‘fee saving’ and ‘modern’, I also read ‘trust’, ‘face to face’ and ‘service’. Whilst the ‘internet agents’ tailor their own offering by taking bits of traditional estate agency to suit their business model, the smarter traditional estate agents take parts of ‘internet estate agency’ to service their own perceived view of what the client really wants.

The trouble with all this is that rather than having distinct differences between businesses we run the risk of having estate agents who each have bits of what the others offer and there is a danger that a once clear gap of difference is further diminished. The choice for the vendor then has a danger of just coming down to who is the cheapest.

As my Gran used to say ‘there is no such thing as a free lunch’ and whilst many lower fee agents seem attractive, what I’ve witnessed from those type of agents in the Plymouth area in the last few months are long tie-ins, with-drawl fees and properties selling at lower prices than they should have. I’ve also heard horror stories about the service that they have given (or lack of). Despite all this I still see properties on the market with these agents.

One box does not fit all and the Internet estate agency model will not replace the high street agent. Believe me, I place myself as an innovative agent and if having a high street office did not work for us, then we’d shut up shop tomorrow and trade from elsewhere. We are certainly not there yet and the benefit of having buyers and vendors able to visit us 7 days a week – without an appointment – still is a strong enough reason to continue doing what we do.

We are not a low fee agent. Our difference is in our service.

When ‘experts’ in magazines can’t agree on what is right for the customer – perhaps us as ‘agents’ simply have to speak to our customers and ask them ‘what they want’ in the future. Rather than telling them ‘what they need’?