An extraordinary year!
Wed 26 Nov 2008
What an extraordinary year we have just been through and I dont know of anyone in the sales market who isnt pleased to see the back of 2008.
The lettings market on the other hand had a bumper year and those estate agencies who saw the value of a strong lettings business early on in the cycle must be thanking their lucky stars. A strong lettings business has and always will be a hedge against downturn and I really dont know how the businesses who focussed so strongly on the sales market have survived the past 12 months. There must certainly be a clear out or consolidation in the industry however unlike one of my more colourful competitors, I dont wish that on anybody.
The volume of sales transactions in the Royal Borough of Kensington and Chelsea quite literally fell off a cliff in 2008 from an average of approximately 3,500 transactions each year since 1995 to approximately 1,000 last year (see graph below with figures taken from the Land Registry).
If I am to take any comfort at all from such a depressing statistic it is that, in my view, the worst is behind us and that whilst I dont think we will see any growth in prices during 2009 (we may even see modest falls) the main correction of approximately 25% has already happened and the market will enter a phase of recovery during 2009 with buyers back into the market for the right reasonsmedium to long term growth and a desire to live in the best parts of probably the best city in the world.
Lets not kid ourselves; with the benefit of hindsight the extraordinary growth in the value of central London property was unsustainable and with the past year out of the way, the future of property in London as a medium to long term investment (doubling up in many cases as a home) looks rosy. This coupled with the fact that as an investment compared to many other assets, it is unbeatable.
Unlike stocks and cash, over the next few years property will show good returns, benefit from an income stream, be real and tangible, not be managed by a faceless fund manager investing in places you have never heard of and will never have the ability to drop to be worth nothing!