192: UK Market Update
Doom: Not a good month most surveys suggest property prices are falling even on an annualized basis. Halifax reported a -1.3% monthly drop. Nationwide a -1.1% monthly drop. Land Registry a -0.4% drop, Hometrack a -0.6% monthly drop. The papers are full of doom stories and almost half the population of the country seem to want to will the house prices down. Those that have benefited from rising property equity are silent. Those that missed the boat are goading the market to crash. Much of this might be caught up in the human psychology of the haves and have nots possible envy, jealousy, a feeling of loosing out or not being given a fair and equitable opportunity. Many of those sitting on significant equity are also probably fearful of a fully fledged property crash. Overall, emotions run high.
Buy-to-let: Lots of stories of buy-to-let boom to bust. However, the reality is that 70% of buy-to-let investors are planning to add to their portfolios a significant number. Most seasoned investors are looking for good value opportunities and such investors are now viewed by banks as some of the lowest risk people to lend money to. As yet, there are few distressed buy-to-let re-possessions. This probably has a lot to do with the average financial literacy of a buy-to-let investor far higher than the average person in the street. As more people find it difficult to get onto the housing ladder because of relatively high price to earnings ratios, these people will choose to rent and the rental market should remain strong as long as employment remains high. So indeed, there are opportunities for the buy-to-let investor, albeit there are greater risks than at any time in the last ten years for a fully fledged house price crash. Unlikely but always possible.
Direction of market: Its difficult to judge which way the market will move likely down, but without widespread unemployment and recession, as long as the credit crunch abates, its difficult to envisage a fully fledged house price crash. Rather we stick with our prediction in December 2007 of a -4% average house price reduction for 2008 as a whole. This off the back of a +15 to +25% increase in 2007 in
In the north: Further north, prices in some areas will suffer as the economy slows and Gordon Browns public sector spending spree ends. Hes run out of money for public sector jobs growth this will hit areas in the north more than most other areas. We expect Scottish house prices to continue to rise albeit at a slower pace than 2007. We believe
Overall direction: So overall, we stick with our guidance that the prices in southern