With debate raging, it is worth pausing for a moment to consider the potential impact of a Brexit on UK house prices. If you read the newspapers, the Brexit debate seems to be focused solely on central London. Many commentators have said that a Brexit would mean central London would have a lower standing in the world, meaning fewer people would be employed in Central London. The theory goes that this would have a negative knock-on effect on wages and the number of available jobs in the capital. However, as anyone familiar with London will know, what happens in central London is not always duplicated in the London Boroughs. After all, we are in Peckham, not Marylebone, Mayfair or any part of Zone 1.
As we move closer to the vote on the 23rd of June, I expect the ‘in’ camp will start to worry homeowners with forecasts of negative equity. The ‘out’ camp, by contrast, will appeal to the Twenty-somethings, who have been priced out of the property market, by emphasising the prospect of a new era of inexpensive housing, should the bottom fall out of the London property market. One thing can’t be denied, central London is attractive to foreign buyers because it offers relative political and economic stability, an open and honest legal system and a lively cultural life. These features, which make London attractive to international investors, are unlikely to be threatened by a Brexit.
However, we are in Peckham, and central London is nearly 5 miles away. We are home to the stunning Peckham library, and, on a lighter note, the famous setting for Only Fools and Horses. And whilst the central London property market raced ahead after 2009, that leap really didn’t affect the Peckham property market until 2014. So, putting central London aside, what would an ‘in’ or ‘out’ vote really mean for the 13,637 property owners of Peckham?
Over the coming months, in the run-up to a referendum, I expect the market to be similar to the run-up to last year’s General Election. When short-term uncertainty prevails, the theory is that big decisions are put on ice, and people are less likely to make big purchases i.e. buy a property. However, in the four months up to last year’s Election, property values in Peckham increased by 1.71% despite many believing we would get a hung parliament!
A vote to stay in the EU would probably see the Peckham property market return to a status quo very quickly, but the opposite result could lead to some changes. Should the UK vote to leave the EU, there would in all probability be a much more noteworthy impact. The principal menace to the Peckham and wider UK housing market could be a rise in interest rates resulting from a Brexit. This could theoretically see the cost of mortgages grow swiftly, pricing many out of the market. That said, two-thirds of landlords buy without a mortgage, so that won’t affect them. Looking at all mortgages as a whole, according to the Bank of England, 44% of all UK mortgagees are fixed rate so this group will also be protected. However, if you don’t have a fixed rate mortgage, it might be a good time to speak with your mortgage broker now because they can only go in one direction!
I suspect that whatever the decision of the-the electorate of Peckham and the country as a whole, over the long term it won’t have a major effect on the Peckham property market. Today, property prices are 595.38% higher than 21 years ago in Peckham and are 8.9% higher than 12 months ago. So, make your own decision on 23rd of June 2016, safe in the knowledge that whatever the result, any volatility in the Peckham property market is likely to be short-term. In my opinion, until the Government allows more properties to be built – the Peckham property market will be just fine.
For more advice and opinion on the Peckham property market call me or stay tuned to the Peckham Property Blog