Wednesday, Jul 22, 2009
Buttonwood tells it like it is.
The Economist: Buttonwood: Dropping A Brick
Already, in the British residential market at least, estate agents are talking as if the crisis is over. Many people seem to assume that once the recession has finished, property prices can resume their traditional upward course ...property’s relative stability may be an illusion caused by an illiquid market; values have simply not been marked down as much as they should have been ...property prices since 2000 have been driven not by fundamentals but by the availability of credit ...in practice the result of inflation would probably be a one-off rise in rental yields caused by a sharp fall in property prices ...A strong economy is a far better backdrop for property than inflation ever could be. ** jcfoot has an interesting point, although I'm not sure it's a highly probably scenario **
3 Comments
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1. Bearly Legal said...
So global property has "outperformed" equities, the former falling by only 10% compared to the latter's 40%... If it's worse than cash, it's not really performing! I really don't get this EITHER property OR equities rule that a lot of people follow, especially when investing for pensions. They're both overpriced at the moment and there are plenty of other choices at all levels of risk (index-linked government bonds < savings accounts < cash under the mattress < foreign currency < metals/commodities).
2. flashman said...
If the economy does pick up then interest rates will also pick up and unemployment will lag behind, so there will probably not be much for EA’s to cheer about.
However I’m seeing increasing evidence of an economic pick up and I can sense a distant boom coming (a technology driven boom). This ‘crisis’ will probably serve to clean out the old unsustainable crap and leave the ground more fertile for a new economy. Unfortunately, many people will suffer and will not be able to rejoin the revolutionary economy because they will not have the necessary skills or education. Unemployment will therefore remain high in Britain for quite some time. I am still a property bear but I am a now an economy bull.
As an (unpopular) aside – The government forecasting record is far better than the private sector forecasting record. Up until the forecast they made in the last budget, they had consistently confounded the private sector forecasters, for 8 years straight.
3. mander said...
A strong economy is a far better backdrop for property than inflation ever could be. Yeah right! What politicians are going to sacrifice the inflated wealth? Idealy they would like stabilisation of house prices but NO it is UP, DOWN or DEEP.