11%
25th January 2012 - Neal Mackenzie, Managing Director at Michael Hardy shares his thoughts. Latest Blog!
The government has released figures for 2011 which shows a drop of 11% in the number of property transactions. Is this a surprise? No not really the property market has followed similar patterns to previous recession from the point of view of activity; the fundamental difference has been house prices.
The last property recession started in 1988 although prices didn’t actually peak until 1989. In 1989 transactions were the lowest for that decade, in 1990 transactions picked up significantly. The main reason? Property prices dropped off the edge of a cliff! Banks and Building Societies were not willing to cut their borrowers any slack even though interest rates were at record levels, repossessions were rife, distressed sales meant distressed prices. The price correction was very quick and very painful but levels of activity moved back to pre-recession levels more quickly.
This time prices have not moved as significantly, in fact this is the fundamental difference between the UK and the US, American property prices have, to use that wonderful Americanism, tanked! Many economists site this property correction as the reason that the American economy has moved back into growth more quickly than the UK. You have to step back to move forward seems to be the logic when it comes turnover of property.
In this recession in the UK, there has not been the painful adjustment; pain has been replaced by a dull ache as prices are held at a level by a lack of both demand and supply. Would the government want it any other way? Probably not. A rapid and painful adjustment would not be popular even though, in the long run, some might argue it is what is needed. As a nation we are not great at taking our financial medicine!!
Wokingham is not immune from the vagaries of the market but its combination of good communications and good schools mean that the pain, even the dull ache, is not as bad as it could be!
