The New Property Bubble

With the property sales market plumbing new depths, property lettings agencies are benefiting. Looking to the longer term, Northwood believes focusing on both sales and lettings offers the best chance for maximum profits

This is the third recession since I started out in the property industry in the late 1970s and while the causes might differ in each case, for the ordinary person each recession creates the same feeling: a feeling of 'uncertainty', uncertainty about their employment, house price deflation and the future. The headlines this time round are enough to make anybody feel uncertain about the future.

Frankly the figures used in the national media to explain the UK's current economic predicament are, for most of us mere mortals, quite incomprehensible. How many noughts are there in one hundred billion pounds again?

Furthermore, as interest rates slide below even unprecedented levels there is no evidence to suggest that even if the banks and mortgage lenders returned to the levels of mortgage lending of 2007 (as they were instructed to do during the first Bank of England bank bailout in October 2008) that there would be any significant demand for these extra mortgages. With house prices falling at their fastest rate on record, homeowners are 'waiting and watching'. According to a recent survey by the Association of Residential Lettings Agents, most Landlords have decided to defer disposing of or acquiring any assets in the current climate and will remain committed to the lettings market.

So, for the foreseeable future, the lettings market will continue to benefit as more and more people seek to 'mark time' in the private rented sector, either as a Landlord or a tenant, or as frustrated buyer or seller. These new groups particularly have contributed to a mini boom in the sector.

However, in a recent interview with a Sunday paper, Housing Minister Margaret Beckett alluded to another factor often forgotten in times like this and that is: 'there's a substantial built-in growth of householder demand in the pipeline'. She is, in my view, spot on. This group wants or needs to move for reasons other than just investment, such as job re-location, marriage, retirement or to accommodate a growing family. They cannot wait forever so the longer they and others 'wait and watch' the more likely that there will be a flood of buyers coming back to the market when they feel 'less fearful' and if this demand starts before supply can catch up you will immediately see inflationary pressure again. As with previous recessions this bubble is growing and like all bubbles it will have to burst at some point.

There is no doubt, therefore, that as a business the property market still holds great appeal but only if you can offer all of the services to ensure that you are able to maximise your potential profits both in boom and in bust.

Reported by Nick Cooper