53.1% of Mid Sussex Voters voted to remain in the EU – What now for the 12,414 Haywards Heath Landlords and Homeowners?

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 has dropped 6% 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”.

With the vote made what next for the 10,121 Haywards Heath homeowners especially the 5,269 of those Haywards Heath 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.

Haywards Heath Property Values

Haywards Heath 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. But the UK property market is quite a monster. Since the last In/Out EU Referendum in June 1975, property values in Haywards Heath have risen by 2209.4%. 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 and we still 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 pricier it will make British export cheaper! This is great for the economy.

Interest rates.

So then 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 is it the 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 4,701 Haywards Heath buy to let landlords have nothing to fear neither, 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 uncharted 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 Haywards Heath property? It might have a short term wobble but in the long term -it’s safe as houses regardless.

Great opportunity in the heart of Hassocks.

Good Afternoon to my blog reading fans, I was just having a quick peek at what has come to market over the last couple of days and found this quirky little gem. On the market with Mansell McTaggart in Hassocks this lovely one bed flat is well priced at £175,000. You can view the details by clicking here.

Perfectly placed for young professional people, it is a stone’s throw from the mainline station with its connections to London and Brighton. It is very well presented, has an unusual feature living room and off road parking. It also benefits from the plentiful amenities of Hassocks high street. We are currently marketing the flat above this one at the moment at £725, which would give a gross yield of just under 5% at a purchase price of £175,000. The property is leasehold, so make sure you check out the service charges and ground rent carefully, as this will have an effect on any yield. It also benefits from a very long lease.

If you are considering a buy to let investment you are welcome to call in to my Martin & Co office on Keymer Road for a coffee and a chat, or email me if you have any questions.

160% increase in Property Values in Haywards Heath since the Millennium.

Haywards Heath house prices since the Millennium have risen by 160.52%, whilst average salaries in Haywards Heath have only grown by 51.27% over the same time frame. This has served to push home ownership further out of reach for many Haywards Heath people as they have to battle against raising considerable deposits and meet sterner lending criteria, as a result of new mortgage regulations introduced in 2014/5.  The private rental market in Haywards Heath has grown throughout the last twenty years with buy-to-let investors purchasing a high proportion of newly built residential properties that were built and designed for the owner occupier sales markets.  For example, in the Mid Sussex constituency, roll the clock back 20 years and there were 36,338 properties in the constituency, whilst the most recent set of figures show there are 43,704 properties - a growth of 7,366 properties.

However, anecdotal evidence suggests that a majority of those 7,366 were bought by Mid Sussex buy-to-let landlords, as over the same 20-year time frame, the number of rental properties has grown from 2,451 to 5,842 in the constituency - a rise of 3,391 properties.

Nevertheless, some say this historic growth of the Haywards Heath rental market might start to change with the new tax rules for landlords introduced by Mr. Osborne over the last seven or eight months. Yet the numbers tell another story. Across the board, mortgage borrowing climbed to a 9 year zenith in March this year as the British property markets traditional Easter rush corresponded with landlords hurrying to beat George Osborne’s new stamp duty changes – buy-to-let landlords borrowed £7.1bn in March 2016 (the latest set of figures released) which was 163% up on the £2.7bn borrowed in the previous March.

You see, from my point of view, I don’t think things will get worse in the buy-to-let market in Haywards Heath and these are the reasons why I believe that:

Firstly, what else are Haywards Heath landlords going to invest in if it isn’t property - the stock market? Since the Millennium, the stock market has risen by an unimpressive total of 5.54%, quite different to the 160.52% rise in Haywards Heath property prices?

Secondly, its true the 3% stamp duty is the first blow on top of a number of other tax changes to be phased in between 2017 and 2021, such as landlords facing a constraint in their ability to offset mortgage interest and, if sizeable numbers of landlords do take the decision to sell their portfolios, this will lead to a substantial amount of second hand properties being put up for sale. Yet that might not be a bad thing, as I have mentioned in previous articles there is a serous shortage of properties to buy at the moment in Haywards Heath: the stock of property for sale being at a six year all time low.

Thirdly, if there are fewer rental properties in Haywards Heath, as supply drops and demand remains the same (although ask any letting agent in Haywards Heath and they will say demand is constantly rising) this will create a squeeze in the Haywards Heath rental market and as a result rents will rise. In fact, I predict even if landlords don’t sell up, Haywards Heath rents will rise as Haywards Heath landlords seek to compensate for increased costs, which means more landlords will be attracted back.