Property market sentiment smashed to smithereens

In December I wrote that 2019 has shades of 2009 about it. Now I categorically don’t think this year is going to be anywhere near as severe as 10 years back, which was close to the peak of the Global Financial Crisis. But there is without doubt the potential for some major political curveballs and market volatility (currency-based in particular) in the months ahead.

One thing that’s very clear is that the property market is already reflecting the apprehension around Brexit and the great unknown it represents. In December, according to the Halifax, annual house price growth slowed to its weakest pace since February 2013 — 0.5% — down from 2.6% in 2017. Last month alone, average prices fell 0.7%. The scene for 2019 has definitively been set.

It’s hardly surprising, all said. Buying and selling property requires confidence but confidence, as we edge closer to Brexit, is close to zero. In fact, it’s not unfair to say that Brexit has smashed property market sentiment to smithereens — a turn of phrase I used that made it onto page 2 of Friday’s Evening Standard. Faced with such radical uncertainty, who can really blame people for putting something as big as a house purchase or sale on hold?

Despite the fact that borrowing rates remain hugely competitive and the jobs market stronger than it has arguably ever been, the vast majority of people are choosing to sit on their hands. What growth there is, is in the North, which hasn't experienced the over-exuberant price inflation of the capital and other areas of the South. There at least there is both value and a price hedge against the potential fallout of Brexit.

One other demographic that’s active at present is the professional and opportunist investor. After all, this is about as good a buyers' market as it could get and pro-investors with the financial strength to ride out short and even medium-term volatility are not missing out on the opportunity to buy up bricks and mortar at significant discounts.

So while we all need to brace ourselves for what is likely to be a bumpy ride this year, lenders and brokers also need to ready themselves for the surge in demand from investors who thrive in such uncertainty and see the unprecedented opportunities it offers. As the old investment metaphor goes, the best time to make money is when there is blood on the streets.