This may be true in the short term but property remains a good long-term investment. Many home owners and experts have not experienced a property crash. All they have seen is double-digit year-on-year growth. So when the market suffers a correction, borrowers need to be reassured by experienced hands and not panicked into selling by the doom mongers.
Supply and demand is the oldest adage used to describe how prices work. Demand is low at the moment because confidence in prices is low and there is reasonable rental supply. But soon it will dry up and consumers will look for properties to buy again.
As most developers have deferred new projects there will be a lack of supply and the houses available will go up in value. How long this will take is the $64,000,000 question and I don’t know the answer. But what I do know is that we occupy a shrinking island. The immigration rate is higher than the emigration rate, Britons are living longer thanks to enhanced medical procedures, the divorce rate is on the rise and the number of consumers living alone is increasing. All these factors indicate that demand will increase – last year alone we were roughly 50,000 properties short of homes available compared with new households created.
It was good to see US Treasury secretary Henry Paulson stating that the US needs to sort out the property market and the rest of the economy will follow. It would be great if Downing Street followed suit and reminded home owners that the property market is cyclical and if consumers sit tight they will recoup any short-term losses and make money on their properties in the long term.
A recent study by Abbey states that it is cheaper to own property than rent and these are the messages that should be shouted from the rooftops to bolster confidence.
If I had the platform I would remind consumers that a home is not an investment. It is somewhere nice and comfortable to live, entertain friends and bring up a family. If you are successful you move up the ladder or to a better area. If you make money on it, great, but a home is for the long term and not just for Christmas.