dothesums blog

Link: http://www.dothesums.co.uk/blog

Hamish McRae writing in the Indie recently summed up the probable short and medium term future of the property market very well.

Over the next couple of years, because of 'quantitative easing' and inflation, interest rates will rise, but probably not until about Q4 of 2010, or later.

It seems likely that property prices will vary, or grow very slowly, until inflation brings them down to somewhere around four-times average earnings.

Our forecasts tend to agree, but with the huge proviso, that this is a generalisation and an average, and as always there will be locations that will do much better/worse.

But, and here we strongly agree with McCrae, that despite the wild movements of house prices in the recent past, the idea of a home as a store of value will persist. Better to hold, or buy, a property and rent it out, than have the money on deposit earning next to nothing.

This is what our clients are telling us. Having lost trust in pensions, endowments, shares and not least the banks, in fact the entire financial services sector, they are storing their capital in physical assets. First and foremost bricks and mortar, things that they can see, touch and control.
This store-of-value argument will probably put some kind of floor under prices.
In short, the generality will be a period of standstill for two or three years and then gradual growth.