ASSET MANAGER MARKET VIEW: Tough times ahead but there are positives too

By Peter Gammon, asset management director at Move with Us

The New Year has only just started but we’re already feeling the uncertainty and gloom which seems to have been the hot topic of most 2012 predictions.

The UK retail sector has shown signs of decline in recent months with major retailers publishing disappointing Christmas figures and many companies, Game and HMV to name just two are predicting difficult times ahead.

It is undeniable that stagnant wage growth and high inflation are connected to the downturn in consumer spending. The festive period has also seen an increase in the number of retailers falling into administration, even prior to their post Christmas results, which has resulted in further job losses and aggravated an already difficult economy.

Clearly this continued uncertainty and negativity within the economy has an immediate impact on the property market, with more and more families choosing to stay put and maximise debt reduction through continued low interest rates, adding to a flat housing market and low levels of supply.

There is some good news when looking at selling repossession stock, as demand still remains high with investors and first-time buyers, with less stock to chose from. There is however a forecasted increase in repossessions for 2012, with the Council of Mortgage Lenders predicting around 45,000 possessions for the year ahead, a figure understandably higher as government and private sector cuts are starting to bite.

For 2012, the CML's new central forecast is for £133 billion of gross lending and £5 billion of net lending - lower than its figures for 2011. The CML also expects fewer transactions in 2012 with a central forecast of 825,000, compared with an estimated 852,000 transactions likely to have taken place in 2011.

On a positive note, incentives and deals for first-time buyers, such as the new Affordable Homes Programme and the First Buy scheme, which offers 95 per cent mortgages to first-time buyers, should somewhat brighten the gloomy outlook for 2012.

According to the CML, the gross mortgage lending in November totalled an estimated £13 billion, 5 per cent higher than in October last year, and 13 per cent higher than in November 2010, with the monthly figure showing its fourth consecutive year-on-year rise, a trend which I am expecting to continue in 2012.

Moreover, homeowners can continue to enjoy record low payments with the current interest rate set at 0.5 per cent, a level which is unlikely to be raised by the Bank of England in the near future.

At Move with Us we have reason to remain optimistic for 2012. There are hot spots around the country where economic activity has remained strong and we see healthy demand for property, and I remain confident that there will be several areas in Britain which will start to see rises in house prices this year, as well as increased demand as homeowners start moving again.

Although many believe the end of the financial crisis is not in sight and there still are tough times ahead, we remain broadly positive about this coming year and look forward to the challenges it will bring.