UK Property Market, Where Next?

The UK economy is fundamentally entwined with its financial and property market. Revolving like the proverbial cyclical wheel of fortune, always hitting high peaks of growth and downturns in equal measures.

It wasn’t long ago that the UK media houses decided it was time again to revisit the property market. This time, the cheerful news was of visible green shoots. Signs that was indicative of slow but measured economic activity.

And although experts within the property sector urged for guarded caution, there’s no doubt that any visible signs of economic activity was good news. vastuplus Good enough to inject confidence on other sectors of the economic landscape.

But the question that needed to be answered is; who really knows where the market is heading in the next 6 months, or in 1 or 2 years time?

And going with generic market opinion, there will never be one-fits all answer to this conundrum, depending on whom you speak with.

One can however assume a logical conclusion based on analytical and statistical data or applicable trend, to work out possible shifts in the market, subject to availability of funds.

It is no brainer therefore to suggest that the actual weight of supply and demand greatly influences not only the property market, but overall consumer psychology.

Since the recession peaked in 2008, there have been staggering job loses across the country as corporate and small businesses struggled to obtain sustainable credit.

However, in such times of stringent economic activity, opportunities await the discerning investor with unrestricted funds than the average Joe public.

Whenever there is an increased flow of distressed properties into the common market, either through auctions or by private treaty, investors potentially make long-term gains.

For those in possession of the elusive 15-30% deposit amount required by lenders in austere times, the market is ripe for rich pickings.

The reverse however is true for those who desperately want to get onto the property ladder but lack the required funding to soften the steep climb. Their desires unfortunately remain muted on wish lists for periods uncertain.

However, some “property experts” and economics analysts have cast shadows of uncertainty over the validity of the appearance of any green shoots. Hence, dampening the possible circumstantial ripple effect this may have on the overall picture of the property sector and indeed the broader economy as year 2009 leaps into 2010.

Liam Bailey, economics analyst for Knight Frank was quoted in online estate agent today newsletter of October 14, 2009 with comments like, “… it would be wrong to expect a continuation of the current rapid recovery in the housing market. The economy is not in a position to permit this in the short term. Similarly, it would be wrong to expect carnage. Real demand is strong, supply in the wider market and the new-build sector is very low and we are unlikely to see a rapid shift away from a low interest rate environment.”

Knight Frank went further to forecast aggregate growth for central London in the five years to 2014 of 38%, compared with 19% for the UK mainstream market, meaning more hikes in property prices.

Equally, Zoopla, the online property-listing portal, which recently published what it called “quarterly survey of housing market sentiment,” stated that four out of five homeowners expect property values to rise over the next six months.

The problem with Zoopla’s survey is that it was based solely on “sheer sentiment”.

Sentiments are feelings, which add no value whatsoever, nor play any tangible role of influencing which direction the property market goes.

In general, the problem with forecast and survey figures are the fact that they are just what they suggest; speculative information based on subjective trend or analysis.

However, in the event that such assumed condition fails, the speculative analysis falls apart like pack of cards.

The fact of the matter is this: Nobody really knows for sure what action the average homeowner is likely to take in a future that is hugely uncertain. Nobody can guarantee what factors may necessarily influence majority of homeowners to seriously consider selling their home.

Historical factors that fuel or stall the property market at any given time goes back to the earlier principle of elasticity of supply and demand.

Since there will be fewer individuals within the general population who are more likely to earn six figure salaries, plus extras in bonuses later this year or early 2010, the chances that they will all invest in properties within a particular location is less plausible.

Moreover, even if by any stroke of chance they all did, the desired effect on the general population would hardly be life changing.

It may also be worthy to note that a slight upward shift in property sales within one location, may not generally affect the overall picture of another location.

The availability of attractive mortgage products and competitiveness amongst the lending sector of the economy is the only practical solution to ignite any major lift-off.

This can only happen when the lending institutions loosen up their tightly held purse strings both on personal and commercial borrowings.

It may just happen before we know it. Let us all sincerely hope it would be sooner rather than later.

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