The one thing about getting older and having spent nearly 30 years in local estate agency is that you learn a pretty good insight into the property market and all of its foibles.
It seems clear that the market is currently entering ‘the morning after’ phase. The floor is littered with champagne corks from all those celebrating the amazing prices they sold their properties for at the point they deemed ‘the top of the market’; the red wine stains of overpriced housing stock remains on the carpet untouched, and there is a general air of stale odour around the bad advice people were given at the end of the party.
After the morning after comes the hangover, and everyone has their own remedy for that; sometimes learned and sometimes accidental. Some sellers combat the hangover with the classic cure of a series of price reductions while some remain stubborn that they will hold fast and ‘be okay’; while buyers either stay in bed and wait for the hangover to pass, or plough on regardless with the purchase, in the sure knowledge that the hangover will pass and normality will surely be resumed eventually and the whole headache will ease.
Metaphorically are the interest rate rises we have seen recently been engineered to call time on the party that was the property market boom and make the hangover a little easier? It’s a tough concept to understand how something that will cost hundreds of thousands of people more money, on a monthly basis, could have some greater good? What the interest rate does is make us see the value of money in many ways. The soaring house prices are without doubt as a result of the cost of borrowing money being as low as it has been for such a long time; we thought that the party of low rate borrowing was going to go on forever! With little return on savings investments; many people turned to purchase second properties to provide them with a return on their money; again adding value to property as an investment rather than a home. When the cost of borrowing increases; property prices need to level to strike the balance between affordability and value for money – it’s simple economics.
I remember in the last crisis of 2008 how economists predicted house price falls of up to 40% and ultimately in Solihull the most we saw was around a 10% fall; which was effectively relatively quickly recovered. Surely I’m not the only one who listens to the news now with a feeling that they don’t know what they are talking about given that we have heard all these threats before and we survived them? As the world turns on its axis; there is always someone that loses out and someone that gains in the grand scheme of things; sometimes we drink the wine and sometimes we reach for the alka seltzer – but do we really ever learn? The answer of course is no; because as soon as the hangover goes away we all forget just how bad it was and look forward to the next party.
