UK property market trends for the next 5 years

This clip from Property Done Properly, the podcast from Century 21 UK, features James Wyatt MPhil (Cantab.), F.R.I.C.S. He has 30 years of experience in prime central London as an estate agent and Chartered Surveyor, as well as being a qualified stockbroker and investment fund manager.

James talks to C21 UK Business Development Manager Andrew Gibbs about his predictions for property market trends over the next 3-5 years, including:

- A shortage of real estate in prime central London, partly driven by an increase of overseas buyers
- House prices could fall up to 50-60% in places, due to inflation and recession

Century 21 UK is part of one the world’s largest networks of estate agents, with 15,000+ offices and 125,000 sales professionals spanning 86 countries worldwide.

[davidwalsh]

This is one of the few people talking about the property market that actually makes sense. Where are we on Price to income Ratios about 10. How about projected interest rates. Well Mortgage rates are based on Treasury Bond Rates and 86% of the TBond market is USD. The US economy is bankrupt and will run a 2 Trillion USD fiscal deficit this year. No bear in mind only 17 countries in the world have a GDP greater than 1 Trillion USD. It like the USA have to borrow twice the total economic output of Saudi Arabia just to keep going for one additional year. Its deficit will be financed by selling bonds and the difference between issue and redemption prices will form the interest rate. If you constantly dump an additional $2T every year of new issuances world interest rates will rise. Finally who buys property in the UK the 21-55 demographic who sells property the 55+ demographic. As the baby boomers (born 1946-1963) exit the property market it will become a long term drag. Finally think this problem through in a macro sense. The average owner not only expects his property to retain value but actually to rise (as property always goes up in value). But think about it you have a huge demographic (the baby boomers) thinking they will transfer their property assets to the younger generations at premium prices. Meanwhile the younger generation now burdened with an unstable job environment and a £50k student loan is trying to enter a market with relatively high long term interest rates and valuations of 10 times average income. This situation is similar to 1987 when everyone tried to get into the property market to obtain 2 x MIRAS. One the deadline expired the market froze. House prices at the time were 5.75 times average earnings inflation at 8%. It took 8 years a 20% drop in house prices and a 50% rise in wages until 1995 when house priceshit 3 times average earnings and the market started up again. This time you are starting at 10 times average earnings as such I think a frozen housing market over 5 years is an optimistic assumption.