Where do we think the market is going?

August 07

Last week, I sent out a quick message saying that I needed your help... and canvassed some opinions about where property prices are going.

I sent the newsletter out to about 1,900 of you - and 140 of you responded. My Direct Marketing friends tell me, by the way, that this is an incredibly high response rather, and I should have expected more like 40 replies, not 140.

Thank you to those who did reply. I have put all your responses into a spreadsheet, so have some group opinions to share.

Thanks also to those who did NOT reply, assuming that your reason for replying was that you do not have particular views. Hopefully you will find the responses interesting.

I have a set of Headlines for what property investors currently (September 2007) believe about house prices, interest rates, and investment opportunities.

Headline 1: We believe that prices will go up in the next year.

A total of 76.4% of those responding said that prices will be higher this time next year than now.

Some were very certain (giving precise figures clearly based on high-level economic research). Others had views on whether prices would go up in London more than the rest of the UK. Some (and these impressed me more) said that the figures given were FOR THEIR AREA, and they had no idea about the rest of the UK (focus!)

Headline 2: We are very divided on what interest rates will do.

• 38.6% said that rates would go up over the next year
• 20.7% said they would be the same
• 40.7% said rates would come down

Of those saying rates would be the same, about half thought that this would be a rate rise (or two) followed by matching cuts.

Headline 3: Most of us are going to carry on buying.

• 83.6% said that they would own more property in a year from now
• 14.3% said they would own the same amount
• 2.1% said they would own less property in a year from now

Headline 4: One third of us are ultra-positive...

34.3% said that prices would be higher, and rates lower, in one year. However, of these 48 voters, only 42 said they were still buying.

Headline 5: Optimism about interest rates has more of an influence on buying patterns than optimism about price rises.

(Rounding errors mean some do not quite add up to 100%).

The BUY / HOLD / SELL percentages are:

	Buyers...	Holders...	Sellers...
Rates Up	80	19	2
Rates Flat	83	14	3
Rates Down	88	11	2
Prices Up	84	14	2
Prices Flat	86	14	0
Prices Down	79	16	5

So the difference - 88% vs. 80% - in buying patterns based on what people believe about interest rates is far more significant than the difference based on price movements - 84% vs. 79%

You can, by now, probably guess my comment.

It really does not matter too much what prices are going to do - if you can get a good positive cash-flow lined up, AND lock in a below-market-value deal, then property is likely to do well for you.

Interest rates are, of course, much easier to manage - simply taking out a fixed-rate mortgage can remove the uncertainty for a few years (though, obviously, your mortgage broker can provide you guidance on what rates are available, and whether a variable rate might be better in your circumstances!)

This is just the feature article from the August 07 newsletter. Subscribe for market comment, forthcoming events, and more.

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