Market Update

Created: 27/01/2006

Phillip Bishop, Director of Perry Bishop and Chambers, looks back at the property market in 2005 and gauges the mood for home buyers and sellers in the coming year.

2005 was certainly a year of two halves. January to June was very slow and many in the property industry were not hopeful of a revival. However, before we knew it, all changed in July and the market rallied. It was a trend that ran to the end of the year.

So what can we expect of 2006? All the signs are that there will be no great gains but no great losses either. Some economic commentators predict a fall in property prices, but those of us handling the sales of second-hand homes- which do of course make up the vast majority of stock for sale in the UK- and are nearer to the everyday market than most, feel that the mood is optimistic but cautious.

This means that the buy-to-let market should remain relatively subdued. The fabled City bonuses will be there and those selling expensive London houses, well appointed country houses and second homes in the coastal and rural hotspots, may benefit, but bonuses will not stimulate the whole market. Births, deaths, marriages, divorces, job changes and major income changes such as promotions or redundancies will be the prime reasons for people buying property in 2006. Fewer people than in recent years will be making investment or aspirational purchases.

By now most people will have realised that the property bandwagon has slowed down and that 2006 perhaps is not the year to think of properties as short term investments, but rather to use them for the purpose for which they were always meant – to live in.

Early in 2005 the doommongers were predicting a violent bursting of the property bubble and the market in free-fall. Fortunately they were wrong. The reason is clear. Contrary to the previous market downturns the economy is stable, with low interest rates. Consequently market confidence has remained reasonably high. The downside is that recent price rises have deterred would-be first time buyers who have been forced to rent rather than purchase.

So, in the absence of an economic downturn and a large interest rate rise – or any other unforeseen event which would affect it – we are seeing a property market in neutral, one which allows choice and reflection for buyers, and encourages reason and patience in sellers. Enjoy it while it lasts.

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