7 June 2010

Fast bucks lose their dough

Am I the only person that thinks that property is first of all a home rather than yet another way to make a fast buck?

The latest figures from the Nationwide Property Index make for interesting reading. First of all the good news: property prices have almost recovered from when they fell off a cliff in 2008 and now stand at less than 10% below their 2007 value.

Remember 2007? That was when too many people thought that the only way property prices could go was up. Mind you, that was all they had done since May 2000. But then bam! Between October 2007 and February 2009 more shirts were lost than Alitalia can manage even on a really good day.

But who lost their laundry - certainly not anybody who bought with the long term in mind. The stats from Nationwide not only show that property prices are almost back to their pre-plummet levels, but if you have owned a home for around 10 years, it has roughly doubled in value.

No, the guys that lost out are those who saw a home only as a short-term investment and, quite frankly, what good are these people to the kbb sector? Frankly, if all you want to do is turn a quick buck on the (inevitably) two-bed apartment you demanded from developers - at the expense of proper family homes - you're probably not going to buy a kitchen or bathroom with long term ownership in mind.

Now for the not so good news... the chart above (also from Nationwide) shows how property prices have risen ahead of earnings, forcing many that want to buy their own home into rented accommodation.

I certainly do not want to see a return of the 110% mortgage based on what someone maybe earning in ten years time - that was a route to financial hardship for too many people - but without a steady stream of new buyers the property market is going to stay pretty static.

I may be going out on a limb here, but I for one do not think the Emergency Budget in a couple of weeks time will kickstart the property market - unless the threat of an increase in Capital Gains Tax makes a lot of people get rid of their 'investment' property PDQ, and at rock-bottom prices.

This may all sound pretty grim for those of us in KBB-Land but I take you back to an earlier statistic: property purchased ten years ago has roughly doubled in value.

I'd bet all my shirts that anyone living in a home for ten years or more will be interested in making a quality investment in the home, not out of the home.

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