The state of the property market

There are some who want to talk the property market down.

It is true that institutional investors have decided to bank some profits, all at the same time, in open ended property funds. These funds have to redeem units for cash. They typically hold 20% as a cash reserve on deposit or in easily saleable bonds and REITs. If more than a fifth of unit holders want to cash up at the same time, they are asked to wait while the fund undertakes the slower task of selling some of the underlying properties. They are not anywhere near bankrupt, they are just illiquid and need time to realise their investments.

Meanwhile in the markets for commercial and residential property there are buyers and sellers agreeing transactions post Brexit just as they did before. Agents say to me there are viewings and offers under way again. June’s house prices rose by 1.3% on the month, though it is true most of the month was before the vote. I am not seeing any sudden marked down bargains in local estate agents windows. Property companies are also reporting that planned lettings prior to June 23rd are still going ahead post the referendum. I have also heard some property investors expressing interest in buying, in the hope that some of these funds will accept lower offers in their rush for the door.

Foreign investors in UK property are reported to be more interested. For them UK property is suddenly 10% cheaper, following the fall in the pound. I would be interested to hear from readers what they are seeing in their local areas in the property market.

The UK has just received a major liquidity stimulus, and a stimulus from a lower level of sterling. Bond yields have just fallen sharply and mortgage rates are low or falling. It would be unusual against such a background to see big falls in property prices, and more normal to see new buyers emerge.