Date Published 27 March 2017

The Pandora Box

The Government have indicated that there are not enough properties and need developers to build on mass to the correct the imbalance of a housing shortage effecting economic supply and demand to bring prices down. Yet I ask the question ‘what do people REALLY want? A bold question some may say as it very much depends on which side of the fence you wish to sit. There are times when we do things for our own personal goals even though we know that it is not really the best route when we take every bodies needs into account. In its broadest context Brexit has illustrated a general 50/50 split. Though what is the right direction to pursue. Only history will tell and the unique Pandora Box reveal.
The Housing Market has remained buoyant over recent years though the Council of Mortgage Lenders have downgraded its forecast for 2017 as it expects the buy-to- let borrowing over the next two years to drop due to increased costs and a drop in yields. It was not expecting house prices to fall though did expect the number of transactions to drop. Though a lack of demand typically causes prices to drop which is preciously what buyers wishing to get onto the housing market REALLY want. Perhaps early signs are already here as British Bankers Association figures for the last 3 months show a drop in mortgage approvals.

Many home owners who are not planning to move typically want the value of their properties to rise as this provides more equity and security for any uncertain futures. We have all seem the glow on people's faces when they have great pleasure telling others how much their properties have risen in price. Though this can be a false sense of security as any home owners looking to upgrade to say a family size 3 bedroom from a 2 bedroom actually end up paying more as a 20% increase on a 2 bedroom house results in a proportionally larger economic increase for a 3 bedroom house. So actually buyers looking to up-size REALLY want prices to drop.

Equity does allow entrepreneurs to borrow against the increased value of their properties. The Government are encouraging ‘white van man' as small business keeps the economy ticking over supporting local business as profits are typically spent locally. So those wishing to borrow REALLY want prices to rise as banks fail to lend without adequate security. Though please be aware that statistically far more new business fail in the first few years of trading than actually survive. Here at Sawyers Estate Agents, we have traded for over 20 years which is quite unique for a small business. The other use of increased equity is for in-house spending on property improvements and extensions which adds value to your property and avoids the need to necessarily move.

Another party who REALLY want prices to rise are those looking to down size which are typically the mature, retired who down size once the kids have left home. Any downsizing results in better purchasing power as some have also seen when relocating from more expensive parts of the country to cheaper areas. Though the direction is typically only affordable one way.

If we now taka a holistic view on what we REALLY SHOULD want to meet the needs of all the above then we actually need to seek a strategy of a drop in prices. This would meet the needs of the larger masses. Though with any market of falling prices, buyers can hold of buying due to fears of negative equity so you end up with even more spiralling of prices. It is as if the Pandora box really does exist, the outcome of which again only history will tell.

Steven Sawyer. Bsc, ACIB, DipML, DipRLM, MNAEA, MARAL, CertDEA