British Property Market Activity Update

British Property Market Activity UpdateBritons are among the world’s most active investors in property abroad – for example Brits buy tangible assets for their overall investment portfolio, they invest in income generating commodities and they secure their future on an overseas bolt hole, they buy shares in property funds, buy off plan and flip before completion for maximum gains and they even plan their retirement based on a home they buy abroad when they are young.

Therefore it is always important to keep the British property market in focus when talking about property markets around the world - after all British interest fuels many an overseas property market with Cyprus and Spain two classic examples, and many Britons fund their overseas property purchase by raising finance on their British home – which is why it is worrying news that British property market activity is slowing down sharply.

News about the decline in market activity and property prices in England and Wales initially brought to light by lenders in the UK such as Nationwide and the Halifax last month has now been confirmed by the UK’s largest advertiser of residential real estate online RightMove.co.uk.  All sides agree that the Bank of England’s interest rate rise combined with the increasing cost of petrol, gas and electricity in the UK had resulted in a dramatic widening of the affordability gap between what people actually earn and can afford to pay for property and the asking prices of properties around the UK.

Naturally enough such a stagnation situation needs a rapid adjustment and this has been effected by vendors reducing the asking prices of properties they are advertising for sale on sites such as RightMove’s.  Furthermore industry conjecture that the Bank of England are not yet done with interest rate rises is resulting in current home owners consolidating and cutting back, it’s seeing new buyers and borrowers electing for fixed rate mortgages and it is causing vendors to think long and hard about their asking prices.  It’s likely that as time goes on prices will experience further bouts of negative adjustment as the UK housing market rebalances.

The effect that this reticence in market activity could cause on overseas property markets is dramatic.  When borrowing becomes more expensive in the UK fewer Brits will be in a position to consider re-mortgaging their homes to release equity to buy abroad.  The markets likely to suffer most are the short haul European emerging markets such as Bulgaria and Northern Cyprus because such destinations offer the least secure return on investment at a time when there is too much domestic uncertainty in the UK housing market. 

Brits are quite simply less likely to take even more risks by buying property abroad especially in non-tried and tested markets at a time like this.

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