Residential Property Prospects 2012
No one predicted many of the extraordinary events of 2011.There’s an argument to say that any conjecture on 2012 could be futile. However one thing I did suggest during the course of 2011 was that property looked like a good investment. Many economic analysts predicted another market meltdown. Yet they were wrong. That’s not to say we have seen consistent growth across the UK. We haven’t. In areas of heavy job losses, the market has been significantly damaged and will take many years to recover.
However I have said it before and I will say it again. National statistics are a waste of time. The most recent is the news from Halifax that UK house prices fell by an average of 1.3% in 2011. What a pointless piece of analysis. It means nothing. Helps no one. Doesn’t tell you what’s happening to the market. Increases uncertainty and at very best shows the shape of the curve. Except it doesn’t. London and the South East actually saw house prices rise last year. Until commentators take time to understand that a semi-detached house in Middlesbrough has about as much relevance to a flat in Battersea as a Gregg’s pasty does to a cream tea at Claridge’s then we won’t get anywhere.
We remain in difficult times. Banks are still reluctant to lend. Rates, although low, are being layered with fees and early repayment penalties. Unemployment looks set to rise before it falls and there’s a dearth of first time buyers. So why on earth would I suggest that property is a good buy?
The Euro continues to teeter. Our European politicians have been good at only one thing. Being indecisive. Their handling of the Euro’s problems has been utterly appalling. With no attempt to resolve the crisis, sticking plasters remain their only tool to combat the increasing view that the only solution to the problem is for some of the weaker countries to drop out of the single currency with a strengthening of fiscal and political union for the rest. The UK is best placed out of this mess. It’s not to say we will not be affected by the continued uncertainty. However what we will be is a safe haven.
At the upper end of our markets, buyers have emerged from around the world. Keen to invest in Sterling denominated investments. Keen to have a second home or investment in the UK and keen to take advantage of the sprightly rental market. Which ironically continues to thrive as new buyers continue to rent rather than buy.
Much of the growth is going to be in London and the South East. Yet cash-rich investors are concerned. The performance of stock markets has been dreadful. The FTSE started 2011 at over 6000 and finished at about 5600. Although I’d suggest that with careful stock selection you can still do well and once again an index only shows the shape of a curve. Bond markets are volatile and the commodities markets have remained even more difficult to assess. Indeed if you want income and you want a tangible investment. Property is it.
Although I hate predictions, I’d better get off the fence before I get splinters.
i) Property will rise, nationally in line with inflation. London will see greater rises. Troubled areas, particularly in the North East will fall. Transaction levels will remain low.
ii) Inflation will subside to 3.5%
iii) Interest rates will remain low but rise towards 1 – 1.5% by year end
iv) Unemployment will peak at about 2.8 million
v) Continued public sector unrest at pension reforms
vi) Wage inflation will begin to rise
vii) Two more major high street chains will vanish
viii) Boris Johnson will be re-elected as London’s Mayor
ix) The FTSE will close 2012 at 6-6500
x) Property will outperform other investment classes.
There’s my half glass full prediction list. Enjoy!