It’s like watching a bad soap opera (are there any good ones?) or episode of Jerry Springer:
One group of fairly thick people holds one point of view. Another group holds the opposite view.
One or two people appear to be voices of reason but they are drowned out by the shouting of either side. Both groups are absolutely convinced that their opinion is right and that no-one else’s view is worth the paper it’s written on.
Consequently both sides cling to the most extreme arguments and outcomes to justify their position. Cue a lot of shouting and not much listening. Unfortunately this also seems to be the way the “debate” over EU referendum is being conducted – A gigantic talk show with egos getting in the way of common sense.
At the moment the bookies are pretty certain that the UK will vote to stay. If you would like to see the current odds just click here.
But let’s look at what will happen if we do vote to leave. The “Remain” campaign is painting the worst possible picture:
- House prices may fall
- Interest rates will rise
- Sterling will collapse
- Inflation will explode
- Jobs will be lost
- The Four Horsemen of the Apocalypse will ride into Mayfair
And indeed this may happen (well maybe not number 6 unless they are looking for a good lunch). But only if we decide to shoot ourselves in the foot. Indeed, as Ed Conway of Sky news points out, this is a scenario that is so unlikely that it is absurd that the government and Treasury department are focussing on it.
What is much more revealing is the figures that they are omitting, which show that the most likely scenario is the “Norwegian” agreement. This suggests that there will be no recession and that the world will keep spinning! Who would have thought that such a thing would be possible…
You can read his short, but informative article here.
Understandably many buyers and sellers are waiting to see what the referendum will bring. Interestingly virtually everyone I speak to thinks the “Remain” vote will win; even those people who have said that they will vote to leave don’t think they will win.
This is mainly because of point 5 – Jobs will be lost. Although this is unlikely as Ed Conway points out, it is enough of a fear to persuade many voters to avoid upheaval and an “uncertain” future. But realistically whichever way the vote goes little will change.
What I can promise is that even if the UK remains in, there will still be plenty of reports in the press about an imminent property crash in prime central London. This is good news for buyers because:
- Prices should not bounce too much after the referendum
- It is impossible for the market to crash if everyone thinks it will. There is simply too much money on the sidelines.
This is essential to understand. The big property market crashes of 1990 and 2008 happened when the consensus was that prices could only go up, i.e. everyone who could buy property was in the market. Hence the mad frenzy with prices increasing 25-35% per annum in 2006 and 2007.
Compare that with the last 6 years in London where prices have increased at 10% per annum compounded and the fact that this has happened with very careful lending (according to Lloyds Bank 54% of properties bought for over £1m between 2011-2014 we bought with cash and a further 25% were bought with mortgages of less than 50% LtV).
You can see the huge difference. London is on a very solid foundation (with the exception of the high density new build developments).
In years to come people will look back on 2016 as a great year to have bought property just as we look back at 1998 as a good year to have bought property despite the fact that at the time things seemed appalling: we had the collapse of the Asian “Tiger” economies, Russia defaulted on its bonds and Long Term Credit Management collapsed putting the financial system in severe danger.
So when the referendum beware being influenced by continued negative reporting. My view is the next “major crisis” they will focus on is the US election and the dangers of Trump winning.
Just remember most of what you read is “noise”. You have to be very clear on the facts so you must not rely on the statistics in the press. They are simply too general and are consequently misleading. Just because falling prices are being reported does not mean that they are in your target area and price range.