Santander research suggests buoyant UK property market

[Nicholas Wallwork]

Banking giant Santander has released a research note suggesting that the UK property market will boom over the coming years. This is just the latest in a long line of reports on UK property which all seem to suggest that a lack of new builds and a growing population will push house prices to record

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Each and every recent report on UK property market predicts a very buoyant sector in the medium to long term. I wonder how many of these reports will change in light of a possible European exit?

 

[propertyvalues]

One thing is guaranteed when a market is in bubble territory: everyone talks the market up even further. Property prices in the main rely on access to finance at a reasonable cost. When access is restricted or money becomes more expensive to borrow, demand for finance falls. Which impacts prices. I cannot call the top in the UK property market. Prices may continue to rise for another few years for all I know. And probably will. But ss the saying goes, markets can remain irrational longer than you can stay solvent. But at some point, the market will revert to trend. There is no asset class in the history of humankind that has defied this fundamental. Yet, I am always mystified at just how much risk investors are willing to assume during a bubble. A simple axiom for investors which Mr Buffet repeats over and over again is that risk is reduced significantly when prices are below their normal historic trend. When prices have overshot the long term trend, then the risks are magnified greatly. One can give any number of reasons why it's different this time. But that won't change the future: prices - one way or another - WILL return to trend.