Britain’s vote to exit the European Union may have positive consequences for the U.S. real estate market.
It’s still business as usually even after the recent Brexit vote 2 weeks ago. Economists are still uncertain of both the short-term and long-term affects of the U.K. seceding from the E.U. But some speculation suggests this could mean good news for U.S. real estate as the dollar is strengthening, at least in the short-term.
The Chief Economist for the National Association of Realtors®, Lawrence Yun, suspects the demand for real estate in the U.S. could rise. Investors are showing additional interest in U.S. real estate as they come to see the U.K. as a less certain place to set up or maintain their business. The expected flood of investors could help drive up sales of all types of real estate, including residential.
The increased strength in the dollar could mean big gains for U.S. homeowners as well and is expected to put downward pressure on long-term mortgage interest rates. Chief financial analyst at Bankrate.com, Greg McBride, speculates that mortgage rates may hit new record lows. Fannie Mae Chief Economist, Doug Duncan, says low rates because of economic uncertainty could last for a while.
This is great news for both prospective and current homeowners. A drop in mortgage interest rates could give new life to home-mortgage refinancing, which started to cool early this year. We might see another refinance boom at financial institutions as homeowners rush to lock in low rates.
According to Tom Cassidy, chief investment officer of the Univest Wealth Management Division, the uncertainty resulting from the Brexit vote could be more long-term than people realize. Once the U.K. starts the process of leaving the E.U., it has 2 years to work out the arrangements of the withdrawal. Most expect the U.K. economy to stall as people will not want to invest there until everything has been figured out.
If investors do turn to U.S. real estate, I’m sure California communities will be some of the first to feel the impact. In the best-case scenario, we will see a boost in our economy and real estate, and a decline in mortgage rates. On the other hand, concentrated investment in densely populated urban areas could further exacerbate our housing crisis. Always prudent to hope for the best and prepare for the worst!
The UK has also recently approved a new public register for property owners as a response to the Panama Papers, this may also drive away some of the Middle East property investment elsewhere.
The impact will be on UK interest rates, it is unlikely for it to have any significant effect on the US market.
I’m all for lower mortgage rates, as I hope they are low when I’m finally ready to buy, but what we really need, in my current market, are home prices to decrease. I have confidence I will be able to obtain a mortgage when I need one, but I fear I won’t be able to find a home in my budget that isn’t a tiny condo with an awful HOA. The American dream feels like it keeps getting further away, rather than closer.
I doubt that there’s enough money in England to rock the world of California real estate. Unlike the Chinese, the British don’t find the location of California all that convenient. Besides, I would think the British would invest in their former colonies where there are lenient tax laws before investing in the U.S. But more than anything I think that the British ddon’t have the numbers to greatly impact an economy as large as the U.S.’ or California’s.