As the so-called "festive" season descends upon us, once again it’s time to look back at what I scribbled last year and assess what might happen in the investment world in the year ahead.
Last year’s Housing Humbug Report covered a number of points, many of which will make an appearance again this year of course – but first, was I right?
I suggested that the Euro would continue as a currency, possibly with a few more bailouts, and it would be a tough time for all. At the time of writing the Euro is still in existence, much to the distress of many I’m sure – and looks to continue to do so for the foreseeable future.
In 2012 – Expect more turbulence and indecision from the Eurozone. Greece won't have much option but to fall back to an alternative currency – when that will happen remains to be seen. The UK appears to be in a tricky situation after taking the decision to sit on the side-lines by exercising its veto option at the recent summit.
Quite whether it was the right decision by David Cameron remains to be seen of course – it would appear there was little other option under the circumstances at the time – however, it leaves the UK in a situation where it can watch decisions being made, but has no control or input – similar to a slow motion motorway pile-up. It could of course all work out for the best with the other major countries in the Euro following suit and the Euro actually being organised properly.
The Euro will still exist this time next year – simply because the practicality of dismantling it is just too mind boggling to consider – whether it will be stable or secure is another matter.
UK Property Prices
Last year I suggested house prices would become more divided and "niche" with London forging ahead and the rest of the country somewhat falling by the wayside – with countrywide average house prices as a result appearing to be propped up by the banks' love of "averages".
This has been the case for the most part of 2011 – and is likely to continue into 2012. There are a few concerns with this, primarily because basing financial mechanisms on entire country averages is tantamount to forcing all shoes to be made in size 9 by law – a nice idea in theory, but completely useless to the majority of the population.
For all intents and purposes the property market in the UK will remain the same until the mortgage market is more sensibly regulated. The banks have proved they don't understand the property market time and time again – and yet they are still allowed to dream up mortgage products, fudge numbers, and suggest that no-one else knows what they are talking about and everyone else is talking baloney. The time has passed for the mortgage world to take responsibility for its actions and the likely introduction of more regulation in the coming months should do more good for the masses than the banks would have you believe.
I suggested there would be a slow-down in the Asian property markets (namely China) rather than the almighty "bubble-bursting" predicted by most of the world's financial journalists. At the time of writing there are reports of a dip in figures from the region – although no reports of financial Armageddon just yet – this could of course change shortly with the imminent news of the change in leadership after the death of North Korea's Kim Jong Il.
For the year ahead I suspect we will see more doom prediction from western journalists, some of which will have an effect of course – but on the whole a low level correction in the property markets in China over the course of the year. Most of the property in China is owned by the Chinese and/or the Chinese government, the west has little control or stock, so as long as the Chinese don’t panic all will be good - provided China keeps out western journalism.
The USA is still in a pickle financially with no strong signs of an end to its perils just yet – recent reports suggest that the foreclosure rate in New York at least is improving, although this has been questioned by the speed at which the banks are forced to disclose overshadowing the numbers.
For 2012 the situation for the US property market remains the same – great bargains to be found if you have cash outside the USA – buy carefully, get the property rented out on a long term contract, and don't borrow to do it. Sit on the income and wait.
Stock Markets and Gold
As I write today the FTSE 100 sits around the 5300 mark, or down roughly 700 points (11%) from this time last year. As I suggested last year, the liquidity offered by shares was required at the time – the uncertainty of even some of the largest companies has meant a fall in confidence by many traditional blue chip investors, as a result, the top companies just aren’t performing because the money has simply gone elsewhere.
Gold was at $1378 and is now at around $1597. Having seen highs of around $1900 during the course of the year it still hasn't proven to be quite the golden goose predicted by the press. Coupled with the drop on the FTSE, it’s clear the money hasn’t fled to gold in favour of shares.
My predictions last year admittedly were somewhat "specifically vague" regarding the markets and gold, suggesting that one or the other had to take a hit to keep the financial balance. For 2012, it would appear the year will start with gold leading the way over the markets – even though gold is quite some way down from the 2011 highs.
With regards to how both will perform throughout the year of course remains to be seen – if the financial markets stay in a similar vein in which they are running now, gold will likely be in for a turbulent year, whilst the markets will stagnate and possibly fall a little further as confidence remains low.
UK Buy to Let
As much as Buy to Let has been welded into the media in the last half of 2012 – approach with caution. Extensive changes are afoot; too many in fact to make a very accurate prediction on what course the industry will take. The mortgage industry has come under heavy fire regarding its products and lending policies and many an institution is promoting the Buy to Let sector purely off the back of rising rents. This can't continue and remain healthy for the economy in general. Interest rates will have to rise soon which will compound problems further, and the fact that the UK doesn't have a social housing system that controls rental prices and payments whilst tying the industry to landlords (Like France and the USA), this really is a nightmare waiting to happen.
Other points of note for the UK property market in 2012
During the course of this year several things have (for want of a better expression) dawned on the house-buying public in the UK.
Overall – the UK property market will be an eventful thing to watch in 2012 and IPIN will be bringing you even more fact, figures, opinions and anomalies as the year takes shape. Meanwhile, enjoy the break and take our hotel room rate quiz!
- Friday 23 December 2011