- Hello, it's Simon Zutshi
here, and in this video,
I want to explain what I
believe the effects of Brexit
are going to be on the UK property market,
and how you can prepare for that,
and also profit from
the situation as well.
Now Brexit is a complete mess.
There's no question, because
of all the uncertainty,
a lot of people are waiting
to see what happens.
And frankly, nobody knows
what's going to happen.
If we get a deal, or don't get a deal,
there's massive uncertainty.
There are a couple of challenges.
Obviously, we've seen the pound
being absolutely smashed at the moment,
the pound is very low
compared to most currencies.
And I believe the pound
could probably drop further
when we leave the European Union.
Now this has several impacts.
Obviously, for the
average man in the street,
if you wanna go overseas
and go on holiday,
that's going to be more expensive.
But the most important thing is that
if we are importing goods into the UK,
they're going to cost more
than they do at the moment,
if the pound goes down further.
So the cost of living could
go up for the average person,
which is generally not a good thing.
Now, the opposite argument to that is
well, actually, for
businesses that export goods
to Europe and the rest of the world,
if the pound is low, it
makes UK products cheaper,
and so businesses that
export might do quite well.
Having said that, if there aren't any
trade agreements with Europe,
there might be lots of extra taxes,
which means those products are no longer
as competitive as they might be
if there's agreements in place.
And as we don't know what's going to happen,
there's massive uncertainty around this.
Now let's think about the property market.
So because the pound is very low,
the UK's actually quite
an attractive place
for foreign investors to put
their money at the moment.
Because it's like all the
properties are on sale,
because the currency is much cheaper.
In the domestic market, we are seeing
massive uncertainty, many
investors are deciding
to wait to see what happens after Brexit.
And so the demand is not
as high as it has been
over the last few years.
We've seen the property
market generally boom
over the last ten years.
In London the last couple of years,
it's actually peaked and
come down a little bit.
I believe that's partly due
to the uncertainty of Brexit,
but I think when anything
goes up too much,
it always comes down and balances off.
But, we noticed that at the
50 plus pin meetings around the country,
more and more landlords are talking
and thinking about retiring early.
And one of the reasons is Section 24,
which came in in April, 2017.
It was a change in the way that
we as property investors are taxed.
Now it's phased in over four years,
but what it means is
anyone who owns property
in their own way, which, most people do,
because that was the best way to hold it,
and anyone who's a higher rate tax payer,
which many property investors are,
those people are going to
be paying a lot more tax
over the next few years.
And so because of that,
many long term landlords
have thought "You know what,
"I don't know if it's
worth the time, the hassle,
"to have my property portfolio".
Their exit plan was probably to retire
at some point in the future,
and just live on a big pile of money.
But now some of those people are saying
"Let's bring that decision forward,
"and maybe sell up properties sooner
"than we were planning to".
So this means we're seeing
more and more landlords
putting some of their
properties onto the market.
So we haven't got as much
demand at the moment,
but an increased supply,
which would suggest,
that generally I think we're going to see
property prices fall further.
Now I don't believe
we're going to have a crash
like we had in 2008,
but I just don't know.
I mean 2008 was a very
unique circumstances.
Around the world banks were
doing irresponsible lending,
investors were doing
irresponsible borrowing,
and it got to a point where many people
just couldn't afford to
keep up their mortgages,
and it all collapsed with a toxic debt,
and so everybody stopped lending,
and people couldn't buy
even if they wanted to,
and all the property prices came down.
They'd been booming for the
last decade before that anyway.
So property prices have been
going up for the last 10 years,
we're due a little bit
of a correction anyway,
and I think the massive
uncertainty around Brexit
and Section 24 is probably
gonna help propagate that
slight correction in the market.
So what does that mean
for you as an investor?
Prices might come down further.
Is it wise to buy now,
or should you wait until
they hit the bottom?
Well, it's a great question.
But here's the thing,
if you wait until prices hit the bottom,
and everybody thinks
they're at the bottom,
it means prices then can only go up.
And so if an owner's got a property
and they think it's gonna go up in value,
they probably won't be prepared to sell it
as a discount as much as they would now,
if they think their property
could fall in value.
So some people are quite
keen to dump their property,
get rid of it, because they
think there will be a crash
like the 2008 property crash.
So therefore, I would
maintain that right now,
there's a real opportunity.
As long as you know what you're doing.
And as long as you're
buying for the long term.
It would not be a good
strategy to buy a property,
to renovate it, with the
intention of flipping it
and selling it on.
Because if you buy it now,
it might well be less,
worth less in six or twelve months time.
However, if you're
holding for the long term,
and in my book, Property Magic,
I talk about the golden rules,
you follow the golden rules,
i.e. you buy in an area
with strong rental demand,
you make sure there's positive cash flow,
and you're looking for
long term investments.
Well, it doesn't really
matter if you buy now
and the value goes down in six months,
because you're not selling,
you're holding onto it for the long term.
And as long as you can rent it out easily,
and it gives you good, positive cash flow,
why on earth would you sell that asset?
So as long as you can hold,
and you can bear out any short
time dip in property prices,
I would say now, as long as
you know what you're doing,
is a great time to be buying property.
Not a good time to sell, but
a great time to be buying.
The other thing is, we have
no idea what's going to happen
to banks and financing
after the credit cra--
sorry, after, sorry, after
we leave the European Union.
So if you've got properties and you plan
to refinance those properties,
and use that money to buy more properties,
many of the investors
I know are refinancing
as quickly as they possibly can,
getting that money ready,
so they've got a cash pot
ready to use to buy cheap properties
if the market does crash.
And if you're planning to refinance,
it's probably better to do
it sooner rather than later,
because if the banks do change policies,
or they get far more cautious,
because the market's coming down,
it'll be harder to refinance
and get that money out.
So I suggest you
absolutely wanna do it now
whilst you still can.
Don't wait until you find a great deal,
make sure you've got your money
available and ready to move.
So in summary, I think massive uncertainty
means massive opportunity.
This whole Brexit thing
is bad news for the UK,
and certainly the way it's been handled
is really bad for the UK.
But no one knows what's going to happen.
Rather than sitting
back, and just waiting,
educate yourself, go out there,
find some really good deals right now,
plan to hold them for the long term.
And remember, the fundamentals of the UK
are that we have a growing population.
Even if we flood the tunnel,
and pull up the drawbridge,
and no one else comes into the UK,
we still have a growing population,
thanks to increased birth rates
and longer life expectancy,
we're living longer, so over
time the population's going up.
Now we have a limited
amount of accommodation,
so that means over the long term,
both rental and property
prices have to go up.
But they don't always
go up, it is cyclical.
So having a small correction
now is not an issue,
because we believe long term,
property prices will come up,
and that's why we're
buying for the long term.
So, remember the property fundamentals,
don't worry about short term news,
no matter how bad it is,
the long term UK is a
great place to invest.
So remember, invest with knowledge,
invest with skill, thanks for watching.
