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Market Comment - May 2008

Nick Churton of Mayfair Office takes a look at the UK property market.

It is understandable that those who possess their own home feel good when they see the value of their investment rising.  Conversely, those anxious to get their feet on the bottom rung of the property ladder are keen to see values fall as their first step would be made much easier. 

But most would equate rising property values with a booming economy that strongly adds to a feel-good factor about the country generally. 

In reality, the fact that prices are going up or coming down makes little difference to most homeowners as, unless they are seriously moving down market or out of the market all together, the differentials largely cancel each other out. 

What is probably more important in our current market is that there is so little turnover, with sales in some parts of the country down by roughly fifty per cent from last year.  In many ways this is far more damaging than price fluctuations, as the knock-on-effect is harshly felt in the overall economy.  Few people may feel great sympathy for estate agents but they are the very small tip of an iceberg that, for the time being, is melting.  Removal companies, builders, decorators, kitchen and bathroom fitters, carpet suppliers and fitters, DIY shops, furniture shops, electrical appliance outlets and hundreds of other allied suppliers and trades people up and down the country rely for their livelihoods on a high turnover of property. 

A downturn in this sector damages the economy, not just in real terms but also in overall national confidence.  Surveys may show that different people have differing views on whether it is better for the market to go up or come down, but ask Gordon Brown.  In the real dark night of his soul he probably could do with a buoyant and rising market right now.  For him the way the property market performs in the coming months could be the last Chancellor’s saloon.