Everyone felt the impact of the first downturn in the property world. We were told the pain would get worse before it could get better. It did. The last 10 years had certainly led us into a false sense of security and it is undeniable that many of us were slow to react.
Everyone felt the impact of the first downturn in the property world. We were told the pain would get worse before it could get better. It did. The last ten years had certainly led us into a false sense of security and it is undeniable that many of us were slow to react. If you search the internet you will discover that bold predictions were being made as early as 2006 about the first property crash. These warnings probably did not register on our radars because mortgage lenders were being overly optimistic with their house price growth forecasts for 2008. There is now talk of us teetering on the edge of a double dip BUT now we are listening. We already can see a pattern forming with predictions of a rise in interest rates causing a fall in house prices and a sharp fall in first time buyers.
Why and how did we get here?
The credit markets have shifted from a climate of easy credit into a new climate of risk averseness and tight lending criteria. This will tend to act as a vicious circle that will lead to an even tighter credit market. The aversion to risk is most clearly evident.
How to cope if it happens?
First of all, it is important to keep a cool head and an open mind. Be creative about finding solutions to your existing financial issues (for example the use of joint equity schemes to sell new builds and or even consider letting them). Secondly, keep the lines of communication open with your lender and professional advisers as they will have a vested interest in helping you find those solutions. Thirdly, streamline the business. Use this time to get leaner and meaner, especially if you did not do so the first time round. Finally, the first downturn did offer some new opportunities, for example securing options over land which do not need to be exercised until 2012/2013, and exposed new sources of business such as niche lenders and joint venture partners which are more recession proof.
What does the future hold?
Predictions are being made of an improvement in 2012 but it could be as late as 2013 before we see any certainty. It is predicted that construction output will fall by 0.8% in 2011 and by 2% in 2012 but will rise by 0.5% in 2013, 2.3% in 2014 and 3.9% in 2015. It is also predicted that the construction industry will eventually return to the 2007 pre-recession level in 2019. Take this time to position yourself for the upturn as total housing starts will be 41% lower than the figure required to meet anticipated annual population growth. We therefore should take comfort that the demand for housing will still be there and that the good times will come again but with better safeguards.
For further information please contact Yildez Betez