| What
do I mean by this?
Especially
in a market downturn the media will really make a big
thing out of any negative information without often
fully understanding it or analysing it - as long as
it gives them a powerful headline!
A
recent example is....
The media have generated headlines with the latest news
from Nationwide with Sky News amongst others reporting
that property prices have fallen for the first time
in five months to signal a downturn in the UK housing
market. The
mortgage lender quoted saying "the average house
price fell 0.3% in November taking the annual rate of
growth to its weakest level this quarter at just 0.4%."
Their chief economist Martin Gahbauer said "There
are early signs that the flow of new property onto the
market may be slowing down again as potential sellers
observe the recent weakness in prices and decide against
marketing their properties."
Some
people are calling this "lazy journalism"
as prices always fall in the run up to Christmas, others
looking at the bigger picture seeing a rise this quarter
as opposed to a small seasonal fall.
With
current borrowing rates so low, many people who were
stretched significantly are now are in a far better
cashflow situation due to mortgage rates dropping -
or as Lord Young said, they "have never had it
so good"! The most important thing here however
is that as soon as credit improves - not back to what
it was at in 2007, but to a more sensible level than
now, the average price of the transactions will rise
so in theory the headlines will say property values
are rising...! The values will not necessarily be rising,
there will just be far more people looking to buy and
not the level of discounts that can be had now. So rather
than being a negative headline, I actually take the
headlines just now as very positive. Even with a lack
of credit and all the negative headlines, and most sellers
being forced to take very low offers - the overall transaction
price is only 16% less than the peak - so the property
market, which as a whole was overvalued by around 10%
anyway has seen nothing like the levels of drops expected
and is in a far stronger position to bounce back quickly
as soon as credit improves.
I
have written previously that the affordable level for
UK property prices based on current salaries was around
£150,000 but I still prefer markets at under £90,000.
I think it will be good for the economy going forward
if we get to around that. |
