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Are Fears of a Post-Brexit UK Property Price Crash Exaggerated?


There is no doubt that the impending EU referendum vote set for 23 June will dominate the news cycle 24/7 over the next three weeks.

Politicians on both sides of the debate will paint apocalyptic scenarios sure to unfold if their side does not win.

The UK is a nation where a large percentage of the population measure their wealth and general confidence in the economy using the barometer of the housing market.

It is therefore not surprising that some in the Remain campaign have predicted a crash in UK houses prices should the Brexit enthusiasts prevail.

But how much of this is grounded in reality and how much is just a scare tactic? Will house prices really crash, interest rates skyrocket, sterling collapse, inflation explode, and jobs be lost?

Understandably, many buyers and sellers are taking a wait and see approach to see what result the referendum will bring.

That being the case, it is a bit of stretch to claim that the market will crash if so many people believe that it will, as there is clearly a lot of money sitting on the sidelines.

The last big property market crashes of 1990 and 2008 occurred when the consensus was that prices could only go up. Prices increased 25-35% per annum in 2006 and 2007.

Conversely, over the past 6 years, London prices have increased about 10% per annum on a compounded basis and banks are being much, much more careful in their lending practices.

According to Lloyds Bank figures, 54% of properties purchased for over £1m between 2011 and 2014 were bought for cash and a further 25% were purchased with mortgages with an LTV of less than 50%.

It would therefore be reasonable to conclude that at a minimum, the London market rests on reasonably solid foundations.

History may well show 2016 to have been a great year to have purchased property.

Beware of exaggerated media reports and remember that newspapers are in the business of selling newspapers and engaging an audience.

And if you are saving for a deposit to buy your first home in these exciting and uncertain times, remember that property crowdfunding investments can help prevent you from losing ground as the market moves up.

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