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Could A Brexit Crash Be Good News For Property Developers?

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Opinions

Could A Brexit Crash Be Good News For Property Developers?

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As the 2007/8 financial crash demonstrated, the property market is intrinsically linked to the country’s economy. Prior to the financial crash, the UK property market was flourishing, only for house prices to experience a record-breaking crash alongside the economy as what eventually be termed “the Great Recession” took hold.

However, there is a school of thought that argues that economic crashes are good for the housing market. As Brexit uncertainty continues, and the prospect of the economic disaster that would be “no deal” becomes all the more likely, it’s worth asking whether property developers could actually benefit from the ensuing fallout.

Why do some people believe economic crashes are good for the property market?

There are two ways to view an economic crash: as a disaster, or as an opportunity. In 2008, those who saw the crash as an opportunity arose, phoenix-like, from the ashes; there is, after all, money to be made even when times are tough.

For property developers, an economic crash means uncertainty, fear, and disruption, but it can also mean opportunity, particularly in regards to the fact that crashes tend to lead to a higher number of mortgage repossessions.

Property developers are then able to buy these repossessed properties at rock-bottom prices, especially as companies like Max Funding can provide bridging loans that ensure the developer has the funds to purchase a new property (or properties) before selling their existing stock.

Developers can then renovate the properties and sell for profit or simply hold until the market begins to rise, and then sell for even higher profits.

So will property developers be able to do this in the event of a Brexit crash?

Yes, though there will be some reservations. For one thing, Brexit is causing something of an exodus, especially in high-value areas such as London.

As a result, some developers may question the strategy of buying repossessed homes to sell for a later profit - if the number of citizens is likely to drop, the challenge of finding buyers could be more problematic.

In addition, it’s also worth noting that there is no way of telling just how long a Brexit crash would resound for; some forecasts suggest it may take decades, rather than months or years, for economic conditions to return to anything close to ‘normal’.

As a result, developers will need to be cautious about how they invest, as long-term planning will be all the more crucial than ever.

Ultimately - and as with most matters related to Brexit - the results of an economic crash will vary depending on the company.

Some property developers are likely to ride the crest of the wave and invest in properties that they can then hold, waiting for better times and then selling on for profit; others, however, will struggle under the continued uncertainty and other economic issues a crash is likely to create.

However, what can be said with fair confidence is that most property developers would - like other business leaders - rather avoid a crash altogether, as there is just no way for them to know which side of the divide their fortunes will fall on in the event of an economic downturn.

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Could A Brexit Crash Be Good News For Property Developers?

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