Posts Tagged ‘property prices’

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Outlook for property prices is bleak

July 17th, 2009

This was an assessment of UK property investment made by the IMF in its recent “health check” on the UK economy.

The IMF gave a warning that the UK has far too much debt, so much so that it is testing the market’s confidence in sterling.  Why is this is important for the UK?  Put simply if markets lose confidence the value of the UK currency will fall, driving up import prices and creating inflation.  The latter is of particular concern when the economy is weak.

The figures being quoted are almost mind blowing, the IMF are warning that UK debt could equal the GDP (Gross Domestic Product), which is around £1.5 trillion.  The bottom line message from the IMF is that the UK needs to tackle public spending, costs have to be reduced.

The IMF also warned of the risk of a Double Dip recession where following a short period of recovery in the UK economy we enter another period of recession.

Overall it is gloomy stuff from the IMF, but it does not mean this is where the UK economy is heading, its a bit like the doctor telling you to change your life-style habits to avoid future illness.  The key thing here is for the UK to take note and follow the doctors orders.

So lets end on a positive note.  It is hard to see that the UK government will not take the action needed to cut spending, so we can reasonably expect to the UK recover from recession and for the economy to start growing in a more sustainable way.  It will not be a return to the heady days of a few years ago, it will be a slower recovery over a pro-longed period, but a recovery it will be.

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Posted in UK Economy, UK House Prices

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Future house prices

July 15th, 2009

Today two very respected organisations published reports on the prospects for UK house prices.

Firstly RICS, the Royal Institute for Chartered Surveyors.  For those who do not know, when you get a mortgage on a property it needs to have a valuation by a surveyor who is a member of RICS, thus they have much knowledge on UK property prices.  RICS identified that the modest increases recently experienced have been primarily due to the lack of housing supply on the market, thus creating a shortage for the relatively few buying.  The bottom line form RICS was that they do not see a prospect of a sustained upturn in property prices until the availability of mortgages improves.

Then there was PwC, Price Waterhouse Coopers, a much respected consultancy company.  The PwC assessment of the UK property market was that they expected to see further falls in property prices in 2009 and 2010.  PwC also indicated that by 2020, even with subsequent growth in property prices, they may not reach 2008 levels, thus it could be well over 10 years for house prices to recover to their former peak.

The house4sale view is that PwC are being a little over-pessimistic, the detail of their analysis is not known, but whilst economic growth is challenging the UK population is growing at the rate of 1% p.a., this in itself would have an upward effect on house prices due to the current lack of supply.

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Posted in UK House Prices

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BCC – Recession is not over yet

July 7th, 2009

The British Chamber of Commerce (BCC) reported that it is “far too early” to forecast the end of the recession in the UK.  In particular BCC noted that unemployment was expected to reach around 3.2 million  by mid 2010.  Perhaps more worryingly the BCC commented that without more measures to minimise effects of the  recession  the UK economy could “drop off” … I guess by this they mean enter into a depression (a prolonged and deep recession).

The BCC is a highly respected group, and its report is based on a survey of 5,000 businesses in the 3 months to June 2009, thus it is certainly a report that should not be ignored.

So what should the Government do to alleviate the concerns about the UK economy?  There is no magic bullet here, but key is building business and consumer confidence, financial liquidity, and perhaps reducing the burden on businesses to help with employment – such as cancelling the NI tax increase scheduled for 2011.

As reported in other posts on house4sale, such feedback from business experts suggests that we are far from the point of recovery in house prices.  Since starting this blog a month ago, and taking account of all of the reports studied, it would seem that we are at least 12 months away before we see any sustainable recovery in property prices.

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Posted in UK Economy, UK House Prices

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Mayfair property & Monopoly

July 2nd, 2009

A report published in several leading newspapers today highlighted how the credit crunch has affected property prices in one of London’s most exclusive areas, Mayfair.

Many of us will know of the game Monopoly and be familiar with the huge rents you paid when “landing on Mayfair”, often enough to wipe you out of the game.  Well maybe things are about to change.

Mayfair had become the home of hedge fund managers, with their companies often making vast profits and paying out huge salaries, they could afford to pay high rents, and probably even helped to increase rents from their demand for prestigious properties. 

Now times have changed, some companies have closed, others relocating, and many fund managers no longer make the huge salaries and bonuses that had become the norm in recent years.  The upshot is rental demand has fallen, and of course this has fed into a huge drop in rents and property prices.  Mind you, for most of us Mayfair is still hugely expensive, but maybe it will get “relegated” in the game of Monopoly.

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Posted in UK House Prices

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UK economic outlook

June 30th, 2009

The UK Government Office of National Statistics (ONS) has reported the UK’s fastest rate of economic decline in over 50 years of reporting.  The statistics show the UK economy shrank by 2.4% in the first 3 months of 2009.  Perhaps more worryingly was the comment that these were far worse than expected by ONS who had previously forecasted a 1.9% decline.

Many are now starting to talk about a “double dip” recession, e.g. we will start to come out of recession later in 2009, then we will sink back into recession in 2010.  The double dip theory is based on the potential impact of high unemployment which is expected to reach over 3 million in 2010. 

No one seems yet to have reported on the regional effects of the projected 3 million unemployment in 2010, clearly there will be some parts of the UK worse hit than others, and no doubt it will be these areas that see the greatest negative impact on property prices.

For details of statistics published by the ONS please visit … http://www.statistics.gov.uk/hub/index.html

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Posted in UK Economy, UK House Prices

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