By Chris Mitchell, managing director of Howards in Norfolk and Suffolk
The property sector is currently awaiting the outcome of the forthcoming general election with some interest particularly as the contest is the closest for a number of years and right now there is no clear consensus as to the likely result. There is some anticipation within the industry that a change of government would see Hips rolled back which would then give the market a boost. This may happen, however Hips are a fairly minor issue against a background of recent world events which any incoming government will have to grapple with. The property boom was debt funded and ended when cheap easily accessable debt was no longer available. Demand for housing remains strong however the lack of reaonsably priced mortgage finance which is a direct result of the world economic situation remains a constraining factor.
Against this background we now have a global drama developing over the issue of sovereign debt which threatens to undermine any efforts by the Uk goverment to improve the property Market. I’m referring here to recent events in Greece which threaten to widen effecting other European countries and maybe the UK itself.
This crisis is of major relevance to the housing Market as it will restrict further the choices available to an incoming government who will be forced to take unpalatable measures to protect our debt rating.
Exactly how this will effect our housing market is a matter of conjecture and right now none of us know what is going to happen.
What we do need to be aware of however is that governments make decisions on political as well as economic grounds and that previous problems of this nature have in the past been solved by inflating the economy to reduce the real value of the debt.
This brings me nicely to the key issue, if inflation returns then the smart money will buy property because as an asset class it has always performed well in inflationary conditions.
An interesting thought in the current economic climate and one to balance against the possible negative effect of an ongoing mortgage famine.