12
Feb
Fortune favours the brave
There is no doubt many in the UK and far beyond are consumed by
the extraordinary economic events that have engulfed just about
every nation the world over. We have witnessed unprecedented
changes to our markets that will for some time to come have
significant ramifications. But is it a bad thing? A strange
question to contemplate as so many grapple with hardship both
domestically and commercially. Nonetheless one has to assume the
answer to be yes. Change was inevitable, most would say long
overdue, but change had to lead to radical reform, welcome or not,
that is the stark reality facing us for some time to come. But no
pain no gain, and the gain I believe will be considerable and more
importantly sustainable. The past decade has seen the world
‘upsize’ beyond proportion and control, 2008 saw
‘downsizing’ and 2009 will see
‘rightsizing’ and that cannot be a bad thing. Pain was
inevitable it was an accident waiting to happen but now it has the
sooner we accept it, put it into perspective and focus forward, the
sooner relief will be felt. But we must be optimistic and positive,
the markets will turn and the future will once again embrace the
next cycle of growth.
The UK property market has suffered greatly with huge falls in
asset values, restrictions on credit and an astonishing halt to new
development at a time when increased housing was the order of the
day. For the first time in recent recessions the property market
was hit before other sectors, ahead of retail, manufacturing or any
other private or public enterprise. However, I am confident to
forecast that the worst is behind us and whilst there is still a
while to go before we are at the bottom, it is a few months rather
than a few years. I simply cannot endorse the view of those
doomsayers who write it off for years to come. Now is the time for
our industry, property, to start once again getting out there raise
the batten from the hatches and let light into this dark place.
Green shoots, surely not!
Whilst many might wish to strike out at those who dare to use
the term ‘green shoots’ I am quite happy to stand in
the firing line and forecast a slow but managed growth. Firstly in
the number of transactions increasing markedly, ‘safe’
lending slowly but surely being restored and values levelling off
by summer. My entire strategy, or should I say that of Penyards,
for this year is progressive, proactive and based entirely upon
growth. I simply don’t believe the media they after all have
made this situation a self fulfilling prophecy constantly quoting
economists, like the IMF, supposedly the greatest authority on
global economic forecasting that have now got it wrong six times
out of six in the last 10 months. The likes of the Nationwide and
Halifax review their forecasts every time they speak out.
Effectively they are apologising for previous miscalculations but
this time, like last time and the time before, they actually expect
us to trust their judgement. I have always considered that relying
upon ones own instinct to be better and more reliable.
Having just completed the first month of trading in 2009 we have
seen a pleasant change, not because there are more buyers and
sales, which there are, probably an increase of around 25% on the
last quarter of 2008, also not because funding and credit has
relaxed slightly, but largely because when we speak to clients and
customers they are far more resolute and determined no to just sit
around waiting for something to happen. Not that anyone seemed
convinced that anyone they knew what it is they have been waiting
for. Mortgages are cheap, house prices are as competitive as they
are ever likely to get, the cost of living, oil, fuel and food
prices are in rapid decline and in these respects we do at least
have potentially some stability for a while into the future.
The change this year for residential transactions is on the
cards, slowly but surely the balance between demand and supply will
emerge with far more balance than we have become accustomed to over
past decades, pressurised impulse buying is unlikely to emerge,
investment buying will be more prudent and less speculative. This
also combined with the rapid collapse of the letting market which
itself has been overheated but now undersubscribed.
‘Green shoots’ yes I think so, reasons to be
cheerful unfortunately not, the economy has a long way to go. I
said in a report recently that this global economic infrastructure
does not need merely correcting but also a thorough cleansing and
so be it, every government have their brushes out now cleaning up
‘on the morning after the night before’. But it is a
time to be optimistic without doubt. Does this make it the right
time to buy? Well back to the intro, fortune will favour the brave,
it certainly isn’t the wrong time.