A new beginning

The residential markets are normally assessed as to how they behaved in a given year by their prior quarterly performance figures. Looking back at the last two quarters of 2009, there were some far healthier statistics. There is a now strong belief, in the residential world at least, that the corner has finally been turned from the depression that started in early 2008.

2010 marks an important time not only in terms of a period of renewed hope but also a time when market sentiment can put itself in ‘re-set mode’. There is no doubting the increase in the number of development companies now moving sites forward from being mothballed. The simple conclusion is that the professional sector believes, at least, the worst is over.

How have such development companies managed to bring sites forward when there has been a lack of development finance? The answer is they have been busy over the last six months repairing their balance sheets via rights issues or indeed via asset sales.

According to the Bank of England there are four major factors being taken into account before strategy is set for 2010, the most important of these factors being Sterling’s effective exchange rate. This has depreciated significantly. Given the cheap pound the export market has been far from weak and prices have been rising. However, it is thought price negotiation by those negotiating orders from overseas during the next six month period, will drive such prices backwards.

Pay settlements went down in 2009. This has therefore lessoned the burden on industry.

What it has not done is reduce unemployment. In fact, it is up significantly.

Borrowers are certainly celebrating the fact that their home loans are cheaper and approximately a quarter of UK mortgage holders are celebrating this fact. It has encouraged them to keep spending at least. The alternative would have been for them to have saved their money and deflated the economy at the very time quantitive easing was being deployed.

Various analysts have had to reforecast in recent weeks as there is now a belief there will be positive growth in the national residential markets. Failing this the south of England will surely see the end of the gloomy days of inactivity and mothballing.

To conclude, there is a certainly a strong degree of renewed optimism to be found in the 2010 residential markets. Sometimes it is enough for the markets to witness such optimism before they simply conclude the same! Let better times roll - roll on 2010.

Justin Sumner is director - new homes at consultancy GL Hearn

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