Amber Light – Proceed With Caution

The subject of property and property prices are a much debated topic of discussion during most times and probably even more so when the economy is so turbulent. I would like to have a pound for each time I am asked as to whether the market has ‘bottomed out’!

Without attempting to avoid the question, I believe it is almost impossible to be specific and to generalise as the various sectors of the market have reacted in different ways. How can it be possible to consider Brighton to say Hastings, commercial to residential, a City centre location to a rural one – no chance.

However, you cannot avoid the facts and the UK economy is in dire straits and will be so for some time to come. We slipped into substantial negative growth during 2009 and there is a modest, perhaps ambitious, increase forecast for 2010. Time will tell, but I do believe there could be a ‘double dip’ and for the economy to get slightly worse before it gets better. The first quarter of the year is always a tough time for most business and I see this year as being particularly challenging. A General Election is imminent, possibly as early as March and whichever political party gets voted into Government there will be a period of uncertainty and no doubt public sector cost cutting and tax rises. There does however seem to be some focused optimism in the business world and a determination to ‘kick start’ some activity and where there is a will, there could be a way.

Residential property transactions dipped from 1.3m at its peak in 2007, down to 0.6m in 2009. Both Halifax and Nationwide predict zero or minimal growth for 2010. For Brighton and Hove, I predict stability and continued improved activity as the Banks begin to sort out their lending criteria and are forced to lend more money, despite higher deposits being required. It is still a great place to live, but the transactions will have to be second-hand property, as little new build will take place.

Commercial property will continue to be dominated by leasehold transactions as opposed to many Freehold sales. The market relies on the supply of finance and as Bank lending only just made 10% in terms of volume in 2009 of its lending levels for 2007, then I cannot see a dramatic change taking place. The loan to value levels dipped from an average of 85% to 65%, plus a more stringent lending criteria in general. With tenant vacancies increasing, caution will be adopted. As for Brighton and Hove, I believe retail premises at sensible rents will always let, offices too but at a slower pace and industrial premises will have to be discounted. Very little Freehold investments, land or owner occupation deals.

We need a sense of business stability, a Government we have some confidence in, low interest rates and an appetite for lending, plus job security. It maybe a tall order, but cautiously possible.