Adaptability is the key to a changing market
The big debate between eminent economists over the past few months has been to stimulate or not to stimulate. Many economists believe that it is important that the government pumps money in to the economy, stimulating growth which will then feed upon itself over a period of time eventually resulting in the economy being able to stand on its own 2 feet. The other side of the argument is that our problem stems from too much borrowing; to borrow more is like giving a shopaholic a new credit card and saying shop to your hearts content! Whilst I am no fan of “Casino Bankers” and their outrageous bonuses in fairness to them all they were doing was what we asked of them. We the public like spending money and there was only so much, so we needed the bankers to come up with more imaginative ways of recycling the same money so we could keep spending it. Bankers called it buying and selling risk. Rather depressingly none of the eminent economic experts who think they know the answer to our present problems seemed to notice we had a problem whilst it was going on. Warren Buffet, the third richest man in the world, a scornful critic of economists and one of the very few people who accurately predicted our current problems, summed things up rather well. “Risk comes from not knowing what you are doing”. Bankers and economists take note!
The problem for the property market is that it is presently caught between the two sides of the stimulant argument. The previous government tried to stimulate the economy whereas the current one appears to feel that borrowing should reflect the new reality of what we as a country can afford. The result of the first policy was a bounce in house prices, the question is what will happen as a result of the second?
Rightmove recently announced that the stock of available properties on their site was the highest it had been for 5 years. It isn’t because there are more houses coming on to the market, despite the demise of Home Information Packs there has not been a surge in property for sale in the Wokingham and Crowthorne area even if it appears that there has. It is the number of buyers, particularly first time buyers that have changed dramatically.
There are several reasons for this. The most obvious one is a lack of credit. Even though the Bank of England pumped £ 200 billion into the banking system most of this money has been kept by the banks themselves rather than given to borrowers to spend. The high street banks feel they are damned if they do lend because they have been accused of lending irresponsibly in the past and dammed if they don’t because with out credit how can the property or indeed the economy get moving?
The second reason for the hiatus is fear of the unknown. The Coalition government has made it clear that it intends to take an axe to government spending and those who disagree with this policy, those who have a vested interest in things staying the way they are, will do anything they can to make the public believe that there will be wholesale job losses and a double dip recession. Who is right only time will tell but until the answer is clearer it is likely that the number of buyers will stay low.
All sounds pretty bleak but it doesn’t have to be. The market will have to adapt, prices may slip back towards where they were in 2008 to persuade first time buyers and the banks they borrow from to become less nervous, so be it. Unless you are a first time buyer the only thing that matters is the difference between what you sell and what you buy for, if the differential stays the same why get hung up on what price you get? The fact is if we all do nothing, nothing will happen but if we adapt who knows the market might just get a bit more life in it.
