Damn , did that dead cat just come back to life after falling off the 2oth floor , I could have sworn I saw it move again. (poking it with a stick) yep it definitely is dead, it just bounced that's all.
What the hell am I talking about well, the property market that is what folks, has the property market finally bottomed out . I am no property expert, although I have dabbled in the past. By no means am I an expert. I am what you would call an arm-chair speculator.
There was a increase in the price of houses of 2.6% according to the Halifax, does this mean we are now over the worst of it and we can now all breathe a sign of relief that the worst is behind us.
I doubt it very much, as much as I would like this to be the case as a home owner myself. I still think we have another 5-6 months on uncertainty before the market picks up again. Speaking from the point of view of your average buyer and from discussion I have had with ordinary people as opposed to your economist, bank of England experts or government housing specialist. They are all still not sure about which way the market will go. There are a couple of factors to consider when looking at the housing market in the UK. We are a nation of home owners as opposed to continental Europe and so the market will most definitely pick-up again, the question is when. The UK is an Island with limited space, we do not have the vast open spaces of the US and the population of the UK is currently around 60million and projected to rise to about 65million by 2018. That is a huge increase and with better health care. We are all living longer and we all need somewhere to live.
So either teenagers after going to to University, College or just starting working immediately want to live with Mum and Dad for another 10 years or more. Then they will have to either rent or buy their own home. Most go the rented route, but after a couple of years come to the conclusion that its better to pay your rent to the bank and own the property at the end of the mortgage term. Also market will be fueled by families needing more space for their children. As well as your average person who just wants to buy a home. These buyers are forced to buy out of necessity and not for financial gains. Obviously factors like interest rates, property prices place a big part in a buyers decision, but they are not the be all and end all. The first people who run for cover are greedy landlords who have tried to make a killing by buying properties, sitting on it for a few years (renting it out) and then selling it for a profit. The problem a lot of these landlords bought at a premium when the market peaked out and now are in a position where the amount they paid for a property is less than what it is currently worth. In addition to this higher interest rates mean servicing the mortgages on these properties is a lot more expensive and price of rent does not cover the repayments. They either have to sell property and cut their losses or just sit tight and pray the market improves. This will take I would say 6 months to weed out all the landlords who fall into this category. Then the market should start to stabilise, estate agents know that those who own houses will just decide to either sell at their price fair or unfair. If their asking price is not met then they will just sit tight and not sell. After all why should they, better to stay where you are and wait for the market to either pick up or get your asking price.
The same goes for unemployment figures, again it will take about 1 year for businesses to restructure, lay off staff, force some employees to take voluntary redundancy or try and cut wage bills through some other means.
The last thing is consumer confidence, that feel good factor where you actually want to go out and spend some money. Like most people, I have been affected by all the bad economic news and I have actually started saving instead of spending my hard earned crust. But then I will get to a point where I feel fairly secure in my job and also have enough money saved up in the bank to at least see me through a few months of unemployment. Once I get to that stage I will start actually spending money, maybe go on that holiday i put off, buy that car i was thinking of getting, splash out on that new suit. Once consumer spending increases, business sell more, need more staff, more jobs created, more taxes, people are able to start spending more and the vicious capitalist machine starts moving again. This in theory should kick start the housing market and hopefully with the last crash still fresh in peoples minds. Greed will take a back seat to common sense and only those who are able to afford the houses will be given mortgages by banks. No more 6 x salary, or self certification of how much you earn without real proof of earnings. Hopefully this will mean the next bust will be at least another 20 years or more and hopefully impact should not be as severe as it has been.
Even with all the doom and gloom out there. This crash has not been as bad as the last property crash of the early 80s. Lets hope the next one when that happens is also not as severe.
So maybe the rise in house prices was just a cat bounce and maybe the property price has a bit more falling to do before it finally does stop bouncing. I do not know, but what I do know and if history teaches us anything. The market will start to rise again as when you hit rock bottom, the only way to go is up.
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