Does short-term dip mean long term cuts

Released on: December 5, 2007, 5:33 am

Press Release Author: Jim watson

Industry: Real Estate

Press Release Summary: The UK housing market is in a curious state in many ways.
After years of high inflation driven by a strong economy and a shortfall in demand.



Press Release Body: The UK housing market is in a curious state in many ways. After
years of high inflation driven by a strong economy and a shortfall in demand, the
market has seen a slowdown since the base rate hit 5.75 per cent and the credit
crunch introduced a wave of economic uncertainty.

Evidence of the slowdown in the housing market has moved from a trickle to a flood,
with predictions of low, zero or even negative growth next year, while property
website Hometrack recorded a 0.1 per cent fall in prices across England and Wales in
October.

This month\'s Hometrack figures doubled that fall, with the midlands, the weakest
growth area for many months, seeing the highest regional fall at 0.3 per cent. But
London, for so long the blazing inferno at the heart of a hot market, is also seeing
notable falls. Greater London in its entirety saw a 0.2 per cent fall, while central
London was down 0.5 per cent, the last of these figures being seen as a direct
result of the stock market turbulence caused by the credit crunch. Savills predicted
earlier this month that City workers would only invest £2 billion in real estate
next year, compared to £5.5 billion in this, Bloomberg reported.

While the central London trend may be disproportionately affected by dwindling City
bonuses, a wider trend could be developing that sees the expectation of a market
slump actually leading into one, Global Insight economist Howard Archer told the
news agency, saying: \"Growing speculation that the housing market could see a sharp
correction over the coming months may also increasingly deter potential house
buyers.\'\'

Hometrack\'s own view, expressed by director of research Richard Donnell, was that:
\"It is hard to see the catalyst for any short-term turnaround in market confidence
other than interest- rate-cuts early in the new year.\"

Those rate cuts, of course, are widely expected, with the Bank of England\'s hint to
that effect coming in this month\'s inflation report. Nationwide has predicted as
many as three by October 2008, which could re-ignite the market. As such, it could
be that the slowdown is a short-term feature, whether one regards this as a
necessary correction or the consequence of misfortune.

It is in the context of long-term expectations that issues such as supply remain. If
the housing market will start picking up again in time, those issues will return.
For those looking to meet the challenge of ensuring government targets for house
building are met by 2020, the current dip in demand, which has led to less houses
being built, means little in the light of the bigger picture.

\"The current decline in construction orders will not necessarily affect the housing
targets for 2020 at all,\" said John Slaughter, director of external affairs for the
Home Builders Federation. He stated that the market was a cyclical entity.

Given the significance of the state of the housing market in the fortunes of
residential buyers and property investors alike, this point is important. Any cut in
housing targets could mean an even greater shortfall than might otherwise be the
case once the factors which have caused the slowdown in the market cease to have an
impact. Instead, therefore, one may expect that there will be no change in the task
given to builders, which will ensure both the residential and buy-to-let markets are
well supplied in the future.

As a result, Mr Slaughter commented: \"The long-term market fundamentals, which is
what we primarily look at, would certainly not suggest that there\'s any case for
reducing the government\'s housing targets at all.\"

In today\'s world Property investment is an excellent investment option especially
investment in UK

Web Site: http://www.assetz.co.uk

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