UK government needs to maintain property feelgood factor
Despite the fact that many experts believe that the UK property market is moving ahead too quickly it was revealed today that the UK economy is picking up pace and will perform stronger than many had expected during 2013 and 2014. As a consequence, gross domestic product should increase by 1.4% during 2013 and a further 2% in 2014, a 0.2% percentage point increase in each of the years.
There is no doubt that the UK property market has pulled the economy out of the mire and the UK government needs to maintain that feelgood factor especially as we approach the next election in 2015. This now poses a very difficult quandary for the UK government, introducing short-term policies to assist the property market, and indirectly the economy, could be seen as playing politics with people’s lives?
Property market boom
When you bear in mind that house price growth forecasts in 2014 were this week increased from 0.5% to an enormous 5% this illustrates the ever-changing situation in the UK. We have an array of overseas investors, specifically from the Far East, injecting billions of pounds into the London property market and also beginning to look at more localised issues.
Quote from PropertyForum.com : “It seems that each week brings another question regarding the valuation of UK property with many experts certain that we will see a setback in the short to medium term.”
The government’s Help to Buy scheme has probably come at the right time for first-time buyers but the wrong time the UK property market. In what could be described as a “honeymoon period” the UK property markets sudden rise from a challenging downtrend has quite literally lifted the hopes and aspirations of not only investors but also the general public.
The need to maintain momentum
As we approach the next election in 2015, political parties will need every vote available if we are to avoid the complications of yet another coalition government. The UK economy, and vast majority of economies around the world, is based on local property prices which offer an array of knock-on effects to the wider public.
If you look back to the bottom of the recent property cycle there were major concerns about negative equity, household finances were under serious pressure, all coming at a time when UK banks were reluctant to lend any money. It is difficult to say with any great confidence what exactly turned the UK property market but there is no doubt that overseas investors, often seeing markets such as London as a safe haven, have more than played their role in the ongoing recovery. While there is a chance that they will eventually sell up and move to the next “property hotspot”, when the worldwide economy recovers, this is unlikely to be in the short to medium term.
Is sentiment ruling investor strategies?
There is no doubt that many people like to jump on board a forward-looking and a forward moving investment market such as the UK property arena. In theory it is fairly simple to jump on board when the market turns, jump-off when the market seems to be overheating but unfortunately human emotion very often comes into play. Fear and greed are two emotions which move any market, up or down, and we are starting to see the emergence of these emotions in the UK property sector.