Out Of The Recession – Proceed With Caution
“I will not allow house prices to get out of control and put at risk the sustainability of the future.” Gordon Brown, Chancellor of the Exchequer. November 1997.
Who would have thought in 2012 we are where we are now after Gordon Brown’s comments in 1997, which invariably turned out to be the same political brush but a different handle.
It has now recently come to light that the UK economy achieved a 1% growth rate between the second and third quarters taking Britain out of the double-dip recession. This growth was the strongest in five years but still means that the economy is 3% smaller before the financial crisis occurred. The London 2012 Olympics and Paralympic Games undoubtedly have played their part in the impact on boosting economic activity in the third quarter.
Economists are warning that the UK is far from out of the economic woods and can expect growth to slow in subsequent quarters.
What does this mean for the housing market?
Anyone who has tried to sell their property since the height of the market in 2007 will know how tough it has been. In the UK we are a nation of home owners and the price of property is driven by demand for housing. However in recent times there has been a shortage of good quality stock and this shortage of housing has not resulted in rising house prices because there has been and continues to be, a lack of lending from the financial institutions.
Simon Read of The Independent points out that “Despite a 9.2 per cent jump in sales agreed and a small increase in new buyers registering with agents, house prices slipped 0.1 per cent over the month in October, the third consecutive month that prices have fallen”.
The foundation of national and sustainable recovery in the housing market precariously rests on the growth of the wider economy. Growth in the economy should result in more job security, higher household incomes and greater confidence from the banks. If this growth is maintained it will cause an increase in the amount of credit being freed up by the banks.
Its not going to be quick! It will take a long time for these changes to take place and you should expect property prices to remain unchanged for the time being.
The potential stumbling blocks for the property market is the crackdown on interest only mortgages and the eurozone debt crisis still weighing seriously on the banking sector.
Whilst not wishing to deflate optimism, it still remains a buyers market especially if you have the capital or can get the credit. This is not a time for sellers to be complacent and sit and wait it out you should take note that if you are unwilling to cut your house price you simply will not get a sold sign up.
Out of the recession – bah humbug.