Recession? Property prices defy gravity/logic/market sentiment

I’m trying to be optimistic. But, through it all, I’m pretty convinced the recession graph will be L shaped at best with a long flat line… at worst, a wonky lightning strike down, flat, down, flat…

But, that bellwether, housing saw a bit of a spurt in January. Activity off a low base has been called ‘a recovery’. I like optimism. And, I’d point to those fundamentals we all believed in 2007… that demographics are changing, that the boomers all have parents bequeathing assets on top of their paid off mortgages… so perhaps the property market has permanently re-rated above trend. We need a bit of confidence (along with those other two C’s – customers and cash!)

But, look at the graph in today’s Sunday Times by clicking here

(It’s the Times’s first ever interactive map, they say… nice!)

House prices have rocketed for yonks, so if it’s really true that we’ve hit the worst brick wall in 100 years… I can’t see January sustaining its perk. No. There’s 10-20% further to go this year, they say… (I’d add ‘and some’ in many postcodes!!) because property is a lag indicator and some folks ain’t yet felt REAL SQUEEZE, even if they do need a roof over their heads.

Nonetheless, after bleak winter, there is always spring. The crocuses of the property postcodes are listed in a nice optimistic article here – 10 postcodes that will bounce back first

Scratch a bit? I can see everyone downshifting to Brighton, but Islington? I’ve lived there for yonks and hung out with lovely legal and city types… but, on the same TimesOnline website, there is talk of Allen&Overy laying off 400 and Simmons&Simmons releasing 70 staff. That Upper Street shuffle of lurvely bars, boutiques and cook shops? I can’t see it thronging when last Sunday felt like a bank holiday and the kings of value, LaPorchetta, had nobody in but us at lunchtime.


1 Response to “Recession? Property prices defy gravity/logic/market sentiment”

  1. 1 Stephen Davies February 23, 2009 at 1:57 am

    Agreed. Property price decreases have a while to go yet. People would say it was a ‘supply and demand’ thing due to the UK being small island and we just couldn’t build the houses quick enough.

    Turns out there is a million houses lying empty in the UK and the supply and demand was on cheap credit but, well, that’s all stopped now. I shudder when I hear of people buying properties in the current market … unless of course they’re buying it for a home to live in and not an investment. Even still, far better waiting a couple of years – MoneyWeek is predicting 50% falls from peak to trough and claim the last housing crash took years to recover so there’s no rush.

    As a bitter renter(!) I had to endure regular folk talk about how they had made “five grand on our property in the last three months” due to the ‘always rising’ property market. Now, however, these same people are in negative equity and tied to a devaluing asset.

    This is going to draw out for a long time because most sellers have yet to come to terms with their property losing its value. If they don’t need to sell they’ll just stay put, without the benefits of drawing equity out of it to buy ‘stuff’ and fancy holidays.

    Bring it on is what I say. The UK has got fat and now it’s time to go on a diet. And if my parents can cope without income for a full year during the miners’ strike of 84, I can sure as hell go without a second holiday.

    The Doom Mongering Bitter Renter

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