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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 poorer.

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 me.

john clare

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