So, in the short term, almost everything that was described by the Leave camp as the Remain camp’s scare-mongering in the EU referendum appears to be coming true: a falling pound, a falling stock market, property funds suspended, property sales falling through and general all-round chaos. But is it bad?
Well, that depends on your point of view. London buyers can finally smell the chance of a bargain after years of a seller’s market, and are making some rather cheeky offers. That doesn’t mean they’re being accepted, but there is definitely a change of attitude.
However, the falling pound has given foreign buyers something of a bonus. Anyone who was already buying a property and sending their money from abroad will have saved upwards of 10% on the purchase price because of the exchange rate. Imagine if your money was held in US Dollars and you were buying a property for £800,000 cash; not particularly extravagant for London. Since the referendum your dollar requirement will have dropped from about $1,175,000 to around $1,035,000 – a saving of $140,000, or £107,000; not bad for doing nothing.
This has massively increased interest from foreign purchasers wanting to buy into London. The city retains a certain snobbery value and is still seen as a fairly safe haven (despite the occasional wobble). So it’s possible that domestic buyers could well end up shooting themselves in the foot by making offers too low to secure the property they want, while foreign buyers snap up all the goodies and bask in the warm rays of a favourable exchange rate.
It’s funny how those complaints from domestic buyers about new build properties being marketed first to foreign buyers have been superseded by domestic buyers allowing those very same foreign buyers into the resale market by driving too hard a bargain. We suspect the current aggressive offering by London buyers will soften into something more realistic once they get tired of viewings and of having their offers refused on the properties they love. We shall see.
Elsewhere, it’s all guesswork. Will corporation tax be cut? Will interest rates go down even further? And will stamp duty be reduced to stimulate the market amid all the drama? Only time will tell. Or maybe it won’t.
The market above £2million was already quiet long before Brexit, although the result of the referendum may give that particular price bracket the stimulus it needs from overseas purchasers, negating the need for stamp duty intervention from the chancellor. But the bottom to middle range, say £700,000 to £1,500,000, could certainly do with an encouraging tickle.
More next month!