What a difference a day makes….
So we were not alone in getting our prediction wrong! But we might be alone in contradicting most property pundits by saying ‘no, things are not going to be the same’ – and that predictions of a property market carrying on as before are somewhat wide of the mark.
The word that everyone does agree on is ‘uncertainty’ – and, as optimistic as we are for the longer term, this is not going to go away for at least the next two years (whilst the economy disentangles itself from our EU membership). So, more than ever, we expect to see country house buyers seeking the reassurance of a professional when it comes to the value they should be paying and the medium to long term outlook for the property they have in mind.
Sterling and the stock markets will undoubtedly recover some – but not all – of the ground they have lost (thanks to the Bank of England’s move to underpin the markets) – but the prospect of at least two, if not three, years of reducing investment into UK businesses (and house builders) creates an inevitable inflationary pressure and, with it, rising interest rates.
In the immediate term, James Roberts, chief economist at Knight Frank, predicts the Bank of England to respond with an interest rate cut of 25 basis points at the Monetary Policy Committee’s July meeting, or perhaps earlier if required. We may also see a return of quantitative easing if there are signs that investment is deteriorating. “This should in our opinion help restore confidence as the summer progresses. Ultimately, it should be remembered that the UK is a country with 60 million wealthy consumers, and a high skill workforce. Consumer goods firms like Coca Cola and BMW will always want to access a market this big. Skills based employers like PwC and Google will always want to access such a large pool of talented workers.”
“The underlying strengths of the UK economy remain in place, and ultimately real estate is an investment that works best for those who pursue long-term goals.”
Our own view is that this was the trigger that was needed to prick the bubble of over-optimistic pricing – which, more than anything, has caused relative market stagnation (certainly over £2m). After all, SDLT rises can be factored in to any buyer’s budget.
We heartily agree with the property pundit who said this morning “Whatever happens to house prices I am absolutely certain that people are not going to give up living in them and that there are not enough to go around. Any falls will recover.”