Words: Ashley Rigg
Published: 1st September 2011
*The hidden house price slump
Ask anyone in the industry in the US or continental Europe about the state of UK property market and the general reply could be neatly summarized as “you got off lightly”.
The stories in the foreign press tend to focus on central London – a market driven by overseas demand and a chronic shortage of family homes. Prices are up 36% in 2 years, according to Knight Frank.
Britain is an island with restrictive planning regulations. Supply is limited so property owners have escaped the sharp falls seen in other parts of the West.
That’s the theory anyway. The realty is different.
According to Nationwide’s figures, after peaking in 2007 at £199,621, average prices are now £163,981, 18% down in real terms.
That’s not the shocking bit. When you add in inflation as measured by the Retail Price Index, prices are down by almost a third, nearly double the nominal decline.
Due to the nature of the cost pressures, it is a similar story in other parts of the western world – the only difference being that real price falls have been compounded with steep nominal declines in countries like Spain and the US.
The good news
The western world seems content on inflating its way out of the huge debt crisis we now find ourselves in. Inflated property prices are part of the problem but ironically real estate is still one of the least bad ways to invest money.
Inflation is a thief and it is stealing returns from all investment categories (bonds and equities in particular). It is not easy to protect wealth in this environment. Along with precious metals, prime located real estate is one of the best ways hedge against rising prices.
If you have access to the right properties, positioning your products and services as a shrewd way to protect wealth is the right strategy – successful execution depends on finding and securing exclusivity on the “right” deals.
Source: Global edge