Following on from George Osborne’s speech in Cardiff a few weeks ago there has been a raft of economic data indicating a massive global slowdown. I was very interested to hear an economist indicate that all of the data and trends are very similar to those of early 2008. These similarities include: Oil and other commodities slowing, the Chinese stock market dropping, global economic slowdown for both developed and developing economies and a slight apprehension developing in the market place. If we look further back in history to the Great Depression of the 1920’s the esteemed economist Milton Freedman blamed the start of this on the increase in interest rates by the Federal Reserve which was in response not to a stronger economy but rather to contain financial speculation.
As I have discussed in previous blogs, whilst I think we are correct in looking at economic data and should be concerned about the general economic outlook from a property perspective, my fear is still that the situation is more akin to the early 1990’s when we saw a stagnating property market caused by a lack of stock and opportunity to purchase. This stagnation only started easing in the late 1990’s as the house building of the mid 90’s started to work its way through the system. As readers of previous blogs will know the data that I am focusing on for the next few months is the number of properties coming on to the market and the confidence of builders and developers.
I think that we are entering into choppy waters as far as the general economy is concerned but my view is that property should provide a safe haven. In this economic climate I would urge the following:
- A rethink on LBTT rates and the 3% surcharge for second properties.
- A rethink on the change to mortgage relief for property investment.
- I would urge the Bank of England to defer any increase in interest rates for the foreseeable future.
- Continued support for first time buyers
As always interesting times!
Partner – Head of Property
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