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2009 Oulook
2009 The outlook for first time buyers
The old bogeyman called Inflation seems to be disappearing from our economy and consumer goods are in real terms becoming cheaper now than they
have ever been. The result of this is that, for those in work with greater spending power, incomes are effectively rising.
In our property market, driven like all markets by sentiment and desire, potential buyers with good disposable incomes have been spooked by media
messages of tumbling prices and mortgage shortages and have sat on their hands before taking the plunge of home ownership despite the knowledge
of the benefits of owning you own home being proved by history.
But life carries on as always. Babies are born and kids (eventually!) leave home and both need to be housed somewhere. In recent years to
accommodate them, and profit from them, the private rental market has increased enormously but the constantly growing demand and steadily
increasing rent levels have failed to attract media interest or dinner party conversations and comparisons of how the prices have risen.
The slowdown of buyers has largely stopped the production of new homes (normally sold at a premium) which will have huge implications for lack
of supply in the hosing market for when the market turns as our archaic methods of building, involving long planning fights with the local
NIMBYs then laying one brick on another and holding them together with mud, take years to create the product. (The US market is fundamentally
different as they have unlimited amounts of off the shelf new homes which can be built to order within weeks.)
With many home hunters, for the time being, being persuaded to rent rather than buy only the landlords will benefit in the long term. The
landlord gains from a steady income and when prices recover, as they will do with a vengeance, he will also have the benefit of increased value
of his asset.
Make no mistake, with the amount of money the government are currently printing to support the banks, inflation will return soon and interest
rates may rise. At this point, perhaps even deeper into a permanent housing shortage, prices of houses will rise substantially.
Those new tenants that think they are not paying a mortgage should realise they are actually paying the landlords mortgage when they should be
paying off their own.
If you can buy- Buy now as the cost of a mortgage is dropping by the month and the availability of funds is at last increasing.
Ron Kennor
General Manager of Robinson Jackson Estate Agencies
23rd January 2009
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