Negative Chatter and the UK Property Market

housing-market-chatterThere’s no getting away from the fact – according to ‘those in the know’ concerns are increasing for a UK property market crash in 2011. Falling prices + falling demand is not a good equation, I think that’s something we can all understand, and the forecast is a further 5% reduction in property prices. The Bank of England reports weak lending and the Office for National Statistics (ONS) report a weakening of the service sector – the sector that accounts for three-quarters of the nation’s output.

As a nation we continued to spend during the height of the credit crunch and in so doing fuelled a 1.2% recovery in the British economy last quarter – the best growth for 10 years or so. Now, however, it seems we have finally got the message – there are going to be cuts and job losses. So we are beginning to tighten our belts – moving us towards that dreaded double dip; among the economists and money men this phenomenon is known as the dead cat bounce, which would be funny if it wasn’t so very descriptive.

Now, I’m not sure if my next question is politically incorrect or not, but I’m going to ask it anyway: isn’t this sort of thing just talking us into that double dip? Isn’t it possible (probable) that all the negative chatter pushes Mr and Mrs Average to tighten their belts and stop spending? The new government have emphasised the need for cuts, and of course we do have to pay for our previous profligacy, but aren’t they just labouring the point to highlight the differences between their approach and the economic laxity of the outgoing government?

It’s all very well us being primed for what is to come but I worry that by painting such a negative picture we are simply building up the impetus for the cat to bounce even higher than it would have done anyway.

As a writer, rather than an economist, it would be interesting to hear your take on this issue – and I stand to be corrected if need be!

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