We're taking notice of Roger
Alnwick
(May-6-2009)
We all know that the UK Government’s economic forecasts are rubbish, but where does that leave us SMEs? We need to get a grip on the reality of what is coming down the road to meet us.
I first heard Roger Martin-Fagg at a Vistage presentation a couple of years ago – he was preaching doom and gloom about unsustainable housing prices. We doing doing very nicely thank you and along with everyone else thought he was talking rubbish.
When I heard him last June, I went straight back to the office and completely reviewed the way in which we look at our business. It gave us a head start in advance of the dramatic downturn that subsequently presented itself last autumn. When I read Roger’s April ’09 update, it rammed home a a few messages that we are definitely taking note of.
This is not a normal recession – it’s a flat bottomed ‘U’ – we are not going to come out of it this year. All the focus is on repairing balance sheets – cash will be tight for a number of years. The US and UK governments’ bank intervention is only replacing lost capital, increasing supply into the system; the banks are effectively gobbling it up and keeping it. The only exit door for governments is inflation at 5% - 6% for eight years. The increase will focus upon food and cost of money, but not property.
The current ‘activity’ (it’s all relative) in the UK housing market is merely a reflection of liquid cash trying to find a secure home with some sort of return. Once that is flushed through, we’ll be back to ‘mortgage basics ‘and Roger’s forecast is that average property values will fall to well under the long term trend of 3.6 times average income, before volume activity truly returns. Message – if you are going to sell, do it this spring at an attractive price in order to get it shifted.
If you are in the public sector, the next two years will be ‘boom’ as Government pours cash in to try to keep commerce moving. That ‘boom’ will inevitably stop – a real concern for the North East that is so heavily dependant on Government-sourced funds and is surely an urgent call to ensure that private sector business is ‘cultured’ and ready to move forward, when the time comes.
So what does that mean for us at George F White? Our rural roots based upon agriculture, combined with an in-depth understanding of valuation and business structure, give us a stable foundation. The really exciting thing for us is the availability of good people at a cost that will give us a sensible return on investment – if an opportunity presents itself, we can take it with open arms.
Hugh Fell, Managing Partner, George F White
Alnwick based land and property Estate Agents
+44 (0)1962 841188