THOMSON ASSOCIATES
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Manchester
M3 4AP

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The North South Divide

This is undoubtedly a reality, but it might be better described as the North, Midlands, South West/London and the South East divide. In fact, it is possible to sub-categorise further because of the way in which the Greater London market acts independently of the provinces. What is perceived as the danger of a third recession after the recovery from 2007/2010 in London is greeted with incredulity in most of the north because the problem never went away. The panic following the initial credit crunch and certainly the demise of Lehman Brothers dissipated and the market corrected itself at a much lower level and at very low volumes, but the sheer overhang of problem stock means it is impossible to predict what will happen in the short term let alone over the next twelve months.

Certainly, sellers in the North of England have become much more realistic about what they might achieve in terms of prices and only those who have to sell for reasons of their own or because of financial pressure are doing so. Turnover levels in the residential market are still very low as a consequence. The underlying issues are that there is obviously still a lot of uncertainty, there is clear evidence of prices still falling in the poorer areas and for most young people the possibility of obtaining a mortgage is reduced, the amount of the mortgage that they will receive is considerably less and, therefore, the deposit required is often beyond their reach. The Government has introduced various schemes to try and bridge the gap, including First Buy etc. and this is having some impact, but only in a fairly small way.

What has become apparent over the last six months or so is that more residential properties, particularly of the cheaper kind, are being repossessed and put on the market. They are often offered for sale in poor condition, they look neglected and they are frequently put into auctions which are unlikely to be local. This means that when they are sold it is often at prices very considerably below what had previously been regarded as the Market Value even after the falls following the crash in 2007. This is making accurate valuation of such properties very difficult. It also means that those people who have improved and cared for their houses are having even more difficulties in selling because mortgage valuers obviously pick up on the repossessed sales and factor these into their valuations.

All of this has led to a much greater demand for rented houses/flats in almost all areas. There are, of course, hotspots and this rental demand does support Capital Values to some degree, because somebody has to be a landlord in order to let the property out. The bad experiences within the Buy to Let market over the last few years as values plummeted are being forgotten to some degree. This is still a specialist area, but finance is beginning to return if there is a reasonable cash deposit. Essentially, if you want to invest in residential property the maxims remain the same. That is to pick a good area with strong sustained demand, plenty of cash to enable you to get a small mortgage and be prepared to wait for ten years until the market rises and you get some capital appreciation. Alternatively, buy something in Central London and if you are fortunate enough to do that be aware that at some point that particular bubble will burst.

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