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Market Outlook - August 2009

Thursday, 6th August 2009

Categories: Market Analysis Property Prices Sales

Author: Peter Barry

It’s been three months since we last wrote about the state of the market here on the blog. At the time we had a tentative feeling that a recovery may be occurring - three months on and those commentators that predicted doom at the start of the year are publishing updates quicker than a Michael Jackson biographer.

My own professional body, The Royal Institution of Chartered Surveyors (RICS), now expect house prices to finish 2009 between 1 and 2 per cent higher than last year. They did, however, go on to spoil the party by predicting that prices will fall back by 5% next year. It’s difficult to take such predictions seriously from an organisation that is already admitting to being up to 18% out with their prediction for the current year.

If I were foolish enough to try and predict the year ahead I would look to what we are seeing day-to-day in our own office rather than listen to an economist sitting in an office crunching data that is already out of date.

What we are seeing is a sustained (around 4 months now) demand from potential purchasers and a lack of properties coming on to the market. Too many buyers chasing too few properties can only lead to one outcome – rising prices. It is hard to see the situation changing for the rest of the year.

Undoubtedly there will be an increase in the number of properties coming on to the market next year as sellers realise that the slump is over but they are likely to be snaffled up by buyers given access to mortgage finance that has been locked away over the last year.

There is growing evidence that the major lenders are loosening the their purse strings again and that is only likely to continue as pressure from the Government increases alongside market confidence. Let’s not forget that banks must lend money to make profits and there is nothing like rising property prices draw them out of hibernation. Expect to see far more attractive deals for first time buyers over the next year – albeit not at the crazy ratios that we saw towards the end of the last boom.

2008 was a disastrous year for the housing market, anyone working at the sharp end must have expected the recovery to be slow and painful but then we never doing anything in moderation when it comes to property. It is hard to believe that buyers are now fighting over properties that they couldn’t be bothered to view a year ago. It is a classic example of the madness of crowds. It’s what makes it unlikely that there will be a gentle recovery or a gradual decline in prices in 2010 – that would be too predictable, and we know that those who predict the market are seldom correct.