A TALE OF TWO MARKETS

Two property markets are emerging in Britain. Prime central London is looking increasingly buoyant, but most of the rest of the UK is troubled. Let's see why they differ.

First, the whole of the UK - the basic problem of the banks not lending still remains. In addition to that, unemployment is rising, tax rises are on the way and big public sector cuts are in the offing, and all the industrial relations turmoil that goes with that. All this will put the dampners on the national property market over the next year or two.

In prime central London, things are slightly different - old money, City money and foreign money rules, and it is less mortgage reliant. Foreigners are buying, because of the cheap pound, and City folk are buying, because the stock market is recovering. Result: property prices are rising in these areas.

Prices have also been supported by very little stock coming on the market. However, this will right itself eventually, because many people who have been renting out their own homes will get fed up with that and want to sell, so they can make that big move up or down the property ladder.

The upturn in prime central London has happened much faster than anyone expected. Whether it can be sustained is a big question, but it is looking more that way. Some agents, like Cluttons, and some consultancies, like Capital Economics, are sceptical however.

A good time to buy may appear in the late autumn, because traditionally there are few other buyers around then, so those who do try to sell will include many "motivated sellers".

There is much uncertainty in the market. Sentiment is such an important factor, so gauging that will be key to figuring what the future holds. One indicator of confidence is the Young Index, published by the Young Group, which shows the majority of investors in the second quarter of 2009 believed London prices would be higher in twelve months time.

One thing is certain, if there is an upturn happening, then it is starting in the same place it always does, prime central London. In past upturns, it ripples out from the capital's most des res areas to the rest of the city and then on to the remainder of the UK. Savills say this is starting to happen with the market hotting up in south east England.

However, with the economy and public finances still in a mess, it may be a long time for this upturn to ripple out any further from London and its surrounding commuter belt. What's more, when those public sector cuts are made after the next election, any property price rises recorded outside of London's prime markets now and in the next few months, will be wiped out.

One exception, may be the country house market, which, like prime central London, relies on cash-rich foreigners, aristocrats and City boys to prop it up. The new City catchphrase "bonuses are back" suggests some people, at least, will be doing well over the next few months, even if the rest of us are struggling.

(All The World's a Home : Global Property News)