State of the market
Is the recession ending, or are price rises a ‘false dawn’. Justin Sumner, director - new homes at consultancy GL Hearn, gives his monthly update
‘Quantitative easing’ remains the buzz word of the moment.
Put simply, this refers to the government’s now £175 billion programme of injecting money into the economy. It is up by some £50 billion from a month ago and some £25 billion less than Bank of England governor Mervyn King would have liked!
‘The going is therefore improving but there are many difficult fences still to jump.’
Why has it been considered necessary to increase QE at this time?
The G20 are certainly worried that any early review of QE may indeed allow recession to take a firm hold once again. They are looking for solid signs of improvement prior to any easing of the programme.
Lending to small firms is a major consideration in all of this. Banks are seemingly still running a very tight lending policy and the economy will not be judged to be fully back on its feet until lending to such firms is more plentiful.
Although the Base Rate is currently being held at 0.5 per cent, the cost of borrowing in the UK is many points higher than this. The finance markets remain tight, with lending extremely hard to come by without pre-requisite levels of equity. We see this situation improving over the next six months, whilst lenders ease their previously stringent lending criteria and their previously war torn balance sheets return to a better state of repair.
If banking share prices and recently reported banking performance figures are anything to go by, this might be sooner rather than later.
As far as new build housing is concerned, early September has seen a good number of previously mothballed schemes coming onto the market and this has meant a previous poor supply of new build product is being addressed.
The worry for the future is if the economy does take off and inflation takes off with it.
Interest rates would have to go up in such a situation and this would quell any property market positive sentiment. The going is therefore improving but there are many difficult fences still to jump.
Have your say
You must sign in to make a comment