With the media ramping up the use of the phrase ‘double dip’ and the dreaded ‘R’ word, it seems that gloomy skies are once again upon us (as I write this, there is a torrential down pour outside). News that food banks and charity shops are opening at an alarming rate only serves to highlight the north-south divide further. Whether true of not, the mention of ‘recession’, consciously or unconsciously, plays on consumers minds and may cause some to rethink or simply delay buying a new home. Lucian Cook, Savills head of residential research predicts that ‘a double dip recession will serve only to widen the chasm between the equity haves and have-nots’. He expects to see price rises of 19.1% in London and close to 16% in the southeast over the next 5 years. The reasons for such a disparity (a shocking 11.9% of homes in the northeast are in negative equity) comes down to ‘where local economies are most affected, repossession levels are higher and transaction levels are lower’. In Kensington, Chelsea, Knightsbridge and Holland Park, a double dip may help ‘tame some of the runaway prices that were simply giving sellers unrealistic expectations’ says Ed Mead from Douglas & Gordon. However, others are more bullish, Sue Foxley from Cluttons commented that ‘nothing is deterring overseas investment in prime central London, yields remain attractive and the underlying drivers of growth in values and rents will persists over the medium term’.
The best way to think about the housing market is this. Like The Swarm at Thorpe Park (their new rollercoaster) that has been terrifying passengers with the sensation of plunging off a cliff, the spectre of a double dip is, for all the worst affected, as much about our psychology as the financial reality. The only way to get through it is to keep calm and ride it out…..
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