By David Bush, of Bush Management in Norwich
When I joined our family business having just qualified as a chartered surveyor the rent for a terrace house in the golden triangle was less than £1 a week and if you wanted a holiday home in north Norfolk there were plenty of cottages with sea views for around £500. Since then I have worked through and somehow miraculously survived four property market recessions. Each time the underlying causes have been different but if there is one common denominator I guess it is probably greed. Irrespective of the problems emanating from America the collapse in the property market in 2008 was so predictable. Self certifying mortgages, loans of 5-6 times income and the ability to borrow up to 125% of the value of the property was a disaster waiting to happen. The only unknown was when. So where do we go from here. There has been some recovery in the market due to a combination of shortage of stock, low interest rates and the money the last government pumped into the economy but depending on which expert you listen to the market is either going up 10% this year or falling between 20 and
40% over the next two years. My own view is this. Employment is the single biggest factor that drives the property market. If you haven’t got a job or you believe your job may be under threat you are not going to move house however attractive the incentives are that are offered to you. With cuts in the public sector we all know unemployment is going to rise. Fortunately in Norfolk we don’t have a huge public sector so the impact here will have less effect than elsewhere. Next at some point interest rates are going to rise and the ratio of loan to income will be at more sensible levels than we have seen in the past. All of this suggests property prices will take a knock and I believe by the last quarter of this year we will start to see a slow but gradual erosion of values over at least a two year period. How much they fall will depend on how well the economy recovers but it should create a buying opportunity for investors as a shortage of stock will see rents nudge upwards to improve returns. If only I could have predicted what would have happened to those £500 cottages I would not be writing this article today.
David is on 01603 883470