Property Market returning to normal behaviour

Abode are seeing encouraging signs that the property market is returning to a more equilibrium normal.  Rightmove’s latest data shows a 14% increase in listings versus the previous month, given the historically low level of available property we saw in Royston this is an encouraging sign, and should result in a more balanced market for buyers moving forward.

One concern that is playing out across industries is the rearing of inflation, be it food, energy or indeed property prices and costs.  This has come to the attention of the Bank of England, with their chief economist Huw Pill, commenting  “That balance of risks is currently shifting towards great concerns about the inflation outlook, as the current strength of inflation looks set to prove more long lasting than originally anticipated.”

“The magnitude and duration of the transient inflation spike is proving greater than expected,” he added.

Periods of rising inflation are normally accompanied by rising rates, which could concern house buyers, the real danger in our current situation is whether the financial system could cope with normalised rates of say 3%.  The banking and debt sectors have become addicted to the prevailing near zero rates and a substantial, all be it normal move away from the zero rate interest level may have unforeseen results for the economy as a whole and home owners especially.

Inflation is however normally positive for property prices, being a real-world asset prevalent inflation nearly always goes hand in hand with property price increases.  As this is the case it would be sometime until that trend is impacted and we would expect house prices to continue rising in the medium term.

All of these uncertainties and negative headlines are no doubt having a dampening affect on the demand for properties, which is allowing for the market to become more balanced.  Our hope at Abode is that the worst case of imbedded inflation doesn’t occur and the market resumes a modest upward trajectory.