I know a few of you have been asking for this for a good few days now, but I did not want to give my answer until I had seen how the public was reacting, how other agents and investors we reacting and how I personally would react. This one’s from Gemma (– censored personal info — ):
Your post made me smile, I wish I could share it with all the people who have put down my idea to get a BTL in Croydon…. They are the same people who put down my idea to buy in Streatham 5 yrs ago and just this week it was the hotspot in the evening standard homes and property section.
It’s nice when it’s going right 🙂
Do you have any views on how leaving the EU could affect investments/ London property? Sorry bit of a heavy question for this early in the morning.
Also are you able to value my flat at all… It’s a one bed Victorian upper ground flat…xxfield road. Bought it for £xx7k in — 20xx. It doesn’t have a garden, which always worried me and I don’t know if South croydon is feeling the effects of the central croydon overspill yet.
Thanks again for the blog, it’s a great read.
Thanks for the questions Gemma, and yes I will value your flat (let’s do that outside of this blog!)
In terms of Brexit, here is my answer, in it’s shortest form as always….
YES, Brexit will have an effect on the property market in Croydon. But it won’t be as detrimental unlike many other areas.
I will explain further with detail.
What is Brexit?
Well, it sounds like something Shakespeare would write. Or say. ‘THOU ART BREXIT WITH THY THEE’. Did anyone ever understand Shakespeare? I studied English at a professional level, and still didn’t get him. Anyway that’s for another blog. On a serious note, according to investopedia.com:
BREXIT is an abbreviation of “British exit” that mirrors the term Grexit. It refers to the possibility that Britain will withdraw from the European Union. The country will hold an in-out referendum on its EU membership on June 23.
What is the REAL question? What do you really care about?
What I have noticed, in the most simplest explanation, is that the general public don’t seem to REALLY care about what the politicians are talking about, more about themselves (and with good reason). The question I think people are actually asking is ‘how will Brexit effect me?’ or ‘how will Brexit effect the Croydon Property Market?’. I think you want to know how will it effect your house price and your investment portfolio and rental prices. And, I think you want to know IF should you sell now, later or never.
Is my House Price Dropping?
If we look back at the previous general elections and how they effect the house prices, you will notice a trend… It seems that buyers, during the build up to any form of election, think a little harder before putting their money down on their buy to let properties, and the same goes for residential buyers also.
Now, I believe that’s these graphs are area sensitive. While the build up on the EU referendum continues, property transactions slow down as you can see from the graph above. In practical terms also, speaking from an Estate Agency owner in Croydon, our sales and lettings have slowed down in terms of volume in the last week, but not in terms of price.
And that’s really the important point here, property prices in CROYDON, and specifically CROYDON, haven’t really slowed down their current boom. While the sales volume may have slowed down in the country, it does not mean property prices are slowing in specific areas. For example, I have just sold a 2 bed house on Mitcham Road (Thornton Heath) with a 23 person open house (if I had put some music on, it would have been a party), and £15k OVER the asking price. Remember, people still have to buy property.
So I would say in short, if you are selling your house in Croydon right now, you don’t have anything to worry about.
I believe one of the main causes of lower property prices if we Leave is the effect of foreign nationals buying property in the UK. Forecasts have shown that UK’s population could be 1 million fewer than projected by 2018! Which obviously is a serious problem, especially in terms of buy to let investors.
What happens to my (Croydon) property price if we leave the EU (Brexit)?
Well the NAEA and ARLA (estate and letting agent regulators) have both predicted a fall in house prices if we vote to leave. I fully agree also. Their reasoning is that lower immigration volumes will mean the average British home would be worth £2,300 – £7,500 less by 2018. Now, I don’t fully agree. Again, I see this as area specific… and I can fully roll with the idea that as a country, yes the property prices very well may drop, but in Croydon specifically… I really, honestly don’t think so. Not with all the development that is going on. Maybe the prices won’t shoot up as high as they would have if we stay in the EU, but I am putting my money (literally) on the fact that Croydon will not lose property value in the next 5 years what ever the outcome.
What I do have a concern about is that the vote OUT will reduce the skilled construction workers entering the country, and as a result, there is no doubt that the construction industry will be hit hard, and we will most likely see a slowed progression on completed builds. Not a good thing for Croydon really.
What about my rental properties in Croydon… ? Will Brexit effect my rental income?
I fully agree with the Head of ARLA, David Cox, who stated:
“The fact that rent costs would face downward pressure is both a blessing and a curse. While renters should face fair and reasonable prices, landlords need to be able to at least break even on any outgoings they have, such as a mortgage. If demand eases to such an extent that landlords cannot recuperate costs, we’ll likely see a mass exit from the market, which would then just have the opposite effect on demand as supply falls – and we’d be back to square one.”
Now, so far we have only really been looking at Brexit as if it were sitting on the end of our noses, but if we look further out, we should understand that this is just the property cycle. Should we vote OUT, yes it will have an effect, but as investors, we should live with it, and understand it will come back around. If you are buying property to keep for a long while, this really won’t make much of a problem…
So what happens if we stay IN?
If there are so many negative implications on what happens if we leave, surely there must be some good things if we stay? YES. There most probably will be.
An ‘IN’ vote will fill us all with confidence. It will also tell all of our wealthy foreign nationals that ‘there is nothing to worry about, keep doing what your doing’, and they will continue to pump money in. As a result, house prices would increase, taking it from the country average of £278,000 to an estimated £303,000 by 2018 (8.99%). NOT taking into account the redevelopment and the investment in Croydon (as if we were a stagnant town) these figures would translate as follows:
Croydon (CR0): Increase of £36,435.92 by 2018 – current average £360,800
Purley (CR8): Increase of £52,566.51 by 2018 – current average £584,742
Sanderstead (CR2): Increase of £40,397.10 by 2018 – current average £449,356
What am I doing?
I am still buying property in Croydon. I do not really believe these events will have much impact on my future as a property investor and business owner. In it’s worst case, it will slow me down a little but nothing to worry about.
Would be great to know what your thoughts are on Brexit, should we stay in or do you see more advantages of LEAVE.