The London residential property market is in a strange place. As an investor with cash reserves and a desire to buy in the capital, we are keeping a keen eye on the market but it is hard to predict where it is going.
One the one hand, we read regularly that developers are fleeing to the regions, that the market has bottomed out, that it is facing a prolonged downturn and that movement is non-existent. There is talk of a post-Brexit recession and a slow down in growth, which you would normally expect to prompt those with existing investment portfolios to panic.
Only unlike in 2008, when the last recession hit, investors – and indeed their investments – aren’t distressed yet. This is arguably because the drawn-out Brexit process has, for now, staved off a crash. Interest rates have remained low which has meant that those with portfolios that would at other times have become distressed and led to fire sales or loan defaults, have instead been able to sit firm and hold the assets indefinitely.
At present the level of debt has reverted to pre-2008 crash levels, but the big difference this time around is that at the moment, the gearing level on loans hasn’t reached the same point. The big question is how much risk should those with investments that are walking that fine line be taking?
The sudden flurry of loan defaults in the US in 2009 teaches a lesson that we would all do well to keep in mind.
With the uncertainty of a post-Brexit economy looming, there is a strong argument to say that now is the time to start seriously considering crystalising losses, safe in the knowledge that these losses are still manageable.
For those who do want to consider a safe get-out, we have the cash ready and would love to talk.