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Housing growth is not as elusive as it appears

by: Robin Johnson
  • 01/03/2012
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Housing growth is not as elusive as it appears
One of the least surprising pieces of news recently was the increase in quantitative easing from the Bank of England.

With a contraction of GDP in Q4 last year and the UK economy still facing challenges at home, from the eurozone and world economy, there is little risk in doing more to prevent growth coming to a standstill or even a decline.

All of this would appear, at face value, grim reading for the housing and mortgage markets and yet it’s not what many of us are experiencing on the ground. Growth is not as elusive as it may appear.

Admittedly, I am talking now of London and the South East. Yet, the buy-to-let market in particular continues to grow and more lenders will want to be a part of this in the coming months. I suspect even portfolio landlords are becoming popular again.

House purchase lending in November experienced a year-on-year rise for only the second time in 2011, according to the Council of Mortgage Lenders.

Meanwhile, demand for rental property continues to significantly outperform the housing market as a whole, according to the Association of Residential Letting Agents.

It reported that the proportion of letting agents unable to meet demand has reached 39%, so optimism is blooming among investors, but also home owners in London, who are predicting a boost in fortunes in the market rather than a drop.

The imminent arrival of the Olympics is making Londoners the more optimistic as many are hoping that the Games will give the market in the Capital a shot in the arm, with a possible influx of overseas investors.

Meanwhile, people in the North East are the least hopeful of price rises. London may be another country for a period of time, as has happened before.

But we should be confident in the future of property for us all going forward. It is likely to grow not diminish.

The issues facing the government, aside from housing us all, include our provision for old age, a finite land mass and a healthy desire from abroad for assets that are respected by the rule of law.

Even in our struggling economy, housing will remain a key asset for people who need to realize their wealth.

It’s not a licence to get-rich-quick as many investors will warrant now. Falling inflation, restricted lending and record low interest rates will ensure capital growth remains muted.

However, though many people would like to see this asset class devalue (including the Treasury and Bank of England), it remains robust because of its finite supply, the strength of the rule of law in the UK , and the fact that the UK still remains the world’s seventh largest economy with all the advantages that brings.

London and the South East may do better in the shorter term, but in the longer term it will still provide one of the best value investments in the UK.

Robin Johnson is managing director of Kinleigh Folkard & Hayward

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