The honeymoon is over

There is divided opinion regarding the property market in the coming year.  On a forum I was on, the speaker said this is not 2008 and the consensus is we will be back to normal; there will be intervention from the government so the property market does not collapse, as it is a bedrock of the UK economy.  

I do not think this will be the scenario; next year will be a lot worse than 2008 on many fronts, property being only one.   

The question is how will the property market react?  There is no simplistic answer to this question.  Even though people prefer headlines, black and white answers.  The market is differentiated geographically and in price segments.   

There were segments in the market which held their value during times of uncertainty and even increased – surprisingly.  Areas which have an international appeal such as Kensington, Notting Hill may not even go down in value.   

This recession will be led primarily by two drivers, one will be inflation and the other the poor state of the economy.  If this was a company it would already be bankrupted, but this is UK PLC where they can print money to keep the game going.  In other words, a Ponzi scheme.   

I can therefore see the appetite for property investment to remain more as a safety net, somewhere recession proof to keep your cash.   

There is a confidence in UK property both here and abroad.  Even when values decrease, as sure as the sun rises again they are confident UK property prices will rise again too.    

Currently, rates have decreased a little where 5 year fixed rates can be secured at around 4.69%; which when looked at with a wide enough lens is not unreasonable.   

The issue is we have had an elongated honeymoon period, and it has come to an abrupt and sudden end.  Those affected will be highly geared, they may be in a situation where instead of the asset producing a monthly income, it now requires a monthly input.   

Even in this potential storm, we have strong interest in a block we could be looking to sell if the price is right.  It comes from a very prominent HNW individual, looking to acquire the property not for themselves but for their staff whom they require a large retinue of whenever they visit London.   

Not someone who is looking at this deal, as a deal, rather if the shoe fits they will purchase it.   

This is why Central London properties are in demand, they behave differently to the rest of the UK.  This market has often been described as in its own bubble, separate to the rest of the UK.  Understandable, when this segment has been fuelled with foreign money.   

Without a doubt, opportunities will start to appear after January.  There will be deals to be done.  So, now is the time to gear up, so one is in a position to execute with short notice.

Suresh Vagjiani
Suresh Vagjiani
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