Monday, May 23, 2011
UK housing market - excuses, excuses, excuses
Forget the omnipresent "location, location, location" it seems that "excuses, excuses, excuses" is the new catchphrase to describe the slump in the UK housing market.
The Guardian ran a story today entitled "Housing slump? blame the weather" with the subhead of:
"Warm weather, a succession of holidays, plus the royal wedding … they're all getting the blame for the spring housing slump".
Miles Shipside of Rightmove says that transaction volumes will remain low and Martin Ellis of Lloyds says that the underlying trend in house prices continues to be one of modest decline.
Actually I'm not sure that there's any need for excuses at all.
Property is a cyclical business - I first came into the industry in the early 80's and this is my third period at the bottom of the chart.
It says something in the Bible about seven year cycles of feast and famine and, whilst it's not an exact art, it's clear that property values follow a cycle too.
Here's an excellent article from Money Week in 2005 forecasting the latest global economic collapse and saying that the cycle is usually around 18 years.
As it says - house prices can’t rise indefinitely for the simple reason that at some point they become unaffordable.
The author does say:
"There are usually 14 years of rising prices followed by four years of recession across the broader economy".
Hindsight shows the slump starting in 2008 and we're now three years down the line.
So maybe we should just realise that regardless of weddings, sunshine and cheap deals to the USA, property prices are going to remain depressed for a little longer yet.
A brave man would say that now is just about the perfect time to invest.
As sure as anything the roller-coaster will be picking up speed again at some point in the near future.