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Published on: General

Let’s Be Careful Out There

This section of the website is called “Insight” and, considering I haven’t written anything for more than a year, you could fairly assume that we haven’t got any.

Not so. There are reasons for the radio silence, but you have your own problems, and I’m sure you don’t need to hear any of mine.

The important things are:

  1.  I am back writing nonsense disguised as marketing.
  2.  Someone has stumbled across my musings while searching for something completely unrelated to Intali (that would be you then).

Intali is twenty-one this year. So, in line with tradition, we get the “key to the door” of one of the EIGHT offices Intali has occupied in those twenty-one years. Property is our business and we lead by example – but our removal company makes more money than we do.

So, we begin our twenty-first year. Wiping the sleep of the Christmas holidays from our eyes to see what the next twelve months holds for us all.

And now for the serious bit. The signs are not good for the economy or property, although the degree of difficulty depends on which brand of “spin” you choose to accept. Some of the PR surveys produced towards the end of last year were laughable in their desperation to highlight the tiniest element of positivity from a morass of negative indicators.

If these guys had been around during the great plague, the headline would have been “Great Year Ahead for Rats”.

And, continuing the animal theme, the great big grey elephant in the property room is yields and their impact on values.

There is almost always a gap between 10-year UK Gilt yields and property yields. This is sensible as Gilts are considered risk-free and property is not.

The average gap since 2010 has been around 3.00% – 3.50%, but, partly due to moronic politics and economic ineptitude, the gap has virtually disappeared. The last time Gilts were higher than property yields was in 2008. I tried calling Lehman Bros to find out how that played out, but they didn’t answer.

The property market is presenting a scenario where property carries the same risk as 10-Year Gilts – which is nonsense and definitely temporary.

As yields show no signs of falling any time soon, the yield (return) from property must increase, and as it does prices will fall. That is not a prediction – it is going to happen. The question is, by how much?

So – as they used to say before every shift on Hill Street Blues – “Let’s be careful out there”.

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