November 2008

REASONS TO BE CHEERFUL?

Ex-NAEA president’s causes for optimism

THERE is a recession looming, housing market activity has slowed considerably and there are estate agency offices closing all around the country.

Melfyn Williams

But hang on in there, for there is light at the end of the tunnel — that is the message from former National Association of Estate Agents president Melfyn Williams, who sees reasons for optimism in the medium and long-term future.

His own agency in North Wales has seen increased activity lately and he takes great encouragement from the fact that, in the current general economic climate, the UK property market remains one of the soundest financial investments around.

“We have seen the sharpest period of property market turmoil in living memory — the market will not correct overnight and there will still be uncertainty,” said Mr Williams. “Prices in some areas may well have to fall further before they reach their optimum sales level and the point where the market can really begin to rally.

“But this does not mean there is no activity in the meantime. In the first half of October, we sold the same amount as a full month last October. Why is this?

“Well, firstly life continues — babies will still be born, people will marry or co-habit, divorce or break up, retire and, sadly, die. People will lose their jobs or get other jobs – sometimes in other areas. A lucky few will win the lottery and all these events usually presage a property sale and/or purchase.

“The second reason is more profound. As both the banks and the stock market are hardly attractive places to deposit hard-earned cash at the moment, investors are seeking sounder alternatives.

“Some are putting it under the mattress or buying gold, while others are favouring financial institutions that are newly backed with government guarantees.

“But others concede that the one place that has consistently performed as a sound investment, despite several ups and downs over the past 50 years, is the UK property market.
“Over this period, values have risen at an average annual rate of more than 10 per cent.

“It is, as ever, impossible to predict the future but there is one key pointer. According to statistics, throughout the UK there will be an inadequate supply of housing over the next few years, made more acute by the rapid slow-down in new home starts.

“House builders have been unable to find adequate finance and have shelved or mothballed projects. This paucity will create high demand and, in turn, a stronger housing market — so much so that despite the fall now some property industry professionals predict that house prices could rise by up to 25 per cent over the next five years.

“This may seem wishful thinking at a time we are all so shocked and despondent, but previous bust-to-boom examples prove such a rise to be a distinct possibility.”