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Crash? What crash?

By: Jim Barnaby

Forecasts of doom and gloom in the property market have not been in short supply of late, both for the residential and buy-to-let sectors. This week has been no exception, but such views are far from universally held.

Only today another gloomy prediction emerged. Economic consultancy Capital Economics predicted that Britain was about to see a two-year fall in house prices, with a five per cent fall this year and an eight per cent decline in 2009, finance website Moneyextra reports.

Such pessimism, however, has been countered by surveyors CB Richard Ellis. Far from taking a negative view of the property market, the firm predicts a soft landing for the property market, with prices rising by three per cent this year.

Head of residential research Jennet Siebrits said: "This is not a repeat of the 1990s crash, as housing equity and employment rates are at an all-time high and interest rates remain low," reports the Daily Telegraph.

"With the benign economic backdrop and unique nature of the housing market, we do not envisage forced sales and repossessions spiralling. Instead, we expect a think market in 2008 with lower levels of transactions," she added.

The company's synopsis is straightforward: the housing market goes through cycles and after a successful one it is now going through a gradual and inevitable correction, with only those over-reacting predicting it will develop into a crash. Or, as the Guardian reported Ms Siebrits as saying: "Don't panic, it's a slowdown, not a crash."

In addition to this, Ms Siebrits told the paper, buy-to-let's future was also good, because of the long-term view most investors take. She said: "A mass exodus is unlikely as these investors tend to have a longer-term view of the market. Within ten years of the 1990s crash, prices were 30 per cent higher than the peak of boom."

Of course, such views had already been expressed this week by Ian Perry of the Royal Institution of Chartered Surveyors (Rics), who said that the present underlying economic scene was "vastly different" to that of the early 1990's. "Supply would have to loosen considerably before prices experience a significant dip," he added.

Yet the context of the comments was that of Rics reporting the highest majority of surveyors reporting a fall in house prices over those reporting a rise last month since 1992. This fact could be interpreted as a clear sign of bad times ahead; more so if Mr Perry's words are ignored or if one chooses to put more stress on his warning that there would be problems ahead if the Bank of England did not cut interest rates.

Thus the divergence between views may have something to do with the extent to which one wishes to see the bigger picture. Indeed there may be a bad future for the housing market if interest rates do not fall. But after today's government figures for retail sales in December showed a slowdown economists such as Ian Kernohan of Royal London Asset Management and Vicky Redwood of Capital Economics have gone on the record to forecast that a 0.25 per cent cut next month is the least that can be expected. For all the potential things which could go wrong, those such as Mr Perry and Ms Siebrits have been keen this week to state that such worst-case scenarios are still much less likely than some imagine.

In today's world Property investment is an excellent investment option especially investment in UK

[Article Source: http://www.positivearticles.com]

Forecasts of doom and gloom in the property market have not been in short supply of late, both for the residential and buy-to-let sectors. This week has been no exception, but such views are far from universally held.

Jim Barnaby is a real estate investment broker and successful property investment adviser delivering research and selected UK and overseas property investment solutions with experience in spanish properties, french property investment, German property, Cyprus holiday homes, Property in Cape Verde, German property investment, cape verde property buy to let property

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