The UK Property Market Update
About a month ago I published
an article about the housing market in London. The article was written
at the beginning of March with figures from January, which were the
latest I had access to. I would like to update that article.
I now have preliminary figures for March, which show a significant
improvement on the earlier ones.
First, the level of inflation has dropped considerably to 1.5%. This
is, of course, bad news for the banks, and indeed, to some extent, for
the government, because it means that debt is unlikely to be inflated
away in the near future. It also means that we are likely to have low
interest rates for longer than was previously thought.
Second, wage increases have risen considerably to 1.8%. The gap between
inflation and wages is small, but the gap is in the right direction. In
short, wages are now roughly equal to inflation, but with a slight
profitable edge. Trends seem to indicate a widening gap between those
two crucial figures, which means for the first time in several years
wages are now rising above the level of inflation.
It is too early to predict much from this news, but it would seem that
the economy is indeed picking up, and that people will start to feel
more wealthy as wage increases start to edge further ahead of
inflation. This implies that disposable incomes will rise, thus
allowing a slight increase in the price of houses. I still think prices
are ahead of the curve, but I am not so pessimistic as I was at the
beginning of the year.
Third, I note that employment figures are improving also. Not only are
the general figures improving, but the problematic figures for youth
employment are also moving in the right direction, and there are
projections (how feasible I dont know) that the rate will improve
beyond the figures for Germany within the next two to three years.
The English do love to push up house prices. They will probably do so
for the next year or two. I would hate to look ahead further than that
for reasons stated in my original article.
I am also concerned at the state of the financial markets, which are
precarious to say the least. It is clear that the European Central Bank
(ECB) will have to start creating money to support half of the
eurozone's governments, including France, as suggested in several of my
earlier articles. With the EU average for economic growth this year
projected to be about half a percent we certainly aren't looking at a
very inspiring market for British industry to sell into.
There is also the question of the sagging stock market. I am keeping my
eyes on the US markets at the moment, wondering if we haven't seen the
top. I would hate to call a top, but George Soros is betting a scarily
heavy amount on a crash. Let's see what happens when the S&P hits
the bottom of its upward trendline. If it sags below that, maybe we
have seen a top. In that case the question has to be whether it drags
down more western markets. That will, of course, make people feel
For once I have to say I am unable to comment with any conviction. My
own gut reaction is that we are in a false rise, and it will peter out
some time soon. I cant see what there is to support the upward march of
property prices. Let me put it this way: I prefer to buy value rather
than a trend. The trend may make you money, or it may trip you up. If
you buy value you dont need to worry about being tripped up. You will
be safe. Perhaps I am getting old and see more snags than a younger
person might see. I certainly dont like risk, and I see risk all around