High drama and high stakes on the political and Brexit front have set the scene for more uncertainty, so how will this impact on the domestic residential property market?
With the imminent prospect of a challenge to Theresa May’s leadership, the resignation of Cabinet ministers including Brexit Secretary Dominic Raab, seemingly no prospect of the draft Brexit agreement being passed by Parliament and the increased likelihood of a harder Brexit, there is now in place a wide range of serious uncertainty factors rarely seen conspiring at around the same time. Furthermore, with Mrs Mays party in revolt and many of her colleagues departing we don’t know yet, if a General Election is also around the corner.
One thing that is certain, is that uncertainty impacts on the property market especially around the times of a General Election or a Referendum. How this uncertainty works its way into tangible outcomes is not straightforward and varies in different house price sectors of the property market.
In the short term, house buyers generally will be more cautious and slower in their decision making, and the impact on prices will mean large house price gains are gone for a while. This doesn’t mean house prices will fall, because buyer demand remains steady and employment levels are excellent. There is the prospect of a flat market in respect of price rises, however discerning house buyers are seeing the current market conditions as an opportunity to move whilst prices remain static. House sellers will sell successfully in today’s market, but they can’t expect a fancy or inflated price and must engage with the reality that over pricing will fail in a market where buyers are cautious.
Different sectors, different outcomes
Different market sectors will have different outcomes in the forthcoming months ahead. Buying decisions on property sales from around £250,000 to £1.5m. are mostly made by very localised factors such as schooling, access to work and general employment levels and family situations ranging from the three D’s (death, divorce and debt) through to the three N’s (new job, new baby, new beginnings). Decisions around such matters of day to day life will continue to be made by house buyers against the backdrop of political uncertainty, so house sales will be maintained at the current level with price sensitivity being the watchword.
Further up the property price sector, and especially in the £2.0m. to £6.0m range house buyers will be more influenced by global and political factors so we could see further negative price impacts in this sector. It’s perhaps no surprise that in 2018 we saw a significant uplift in house rentals in the £6,000 to £8,000 p.c.m. sector, driven by future potential house buyers who have decided to retreat into the luxury rental market and watch for when the top end house sales market starts to recover. Such recovery could be a year or so away, but one thing is for sure, all markets when they rebound from a low come back with a sharp and fast uptake. Savvy top end buyers know this and are playing a waiting game, or taking care of business now by buying at extremely competitive levels.
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