With the recent turmoil in the global economies, the lenders have suddenly restricted the amount of cash that they have available for commercial mortgage products. There are now less mortgage products available then ever, which has meant that the amount of money available to property investors is at record lows thus restricting property investors to do any sizeable deals.
The downturn also means that any property sellers are finding it hard to sell their properties due to the restricted finance, which is impacting the overall property market. The sales of properties are at their lowest pace for a generation and it seems that any recovery that may come will be slow and a long drawn out process. So what is the answer to the overall problem?
The key to the recovery in the property market will be the availability of liquidity in the mortgage markets. Until property buyers are able to get their hands on readily available finance, the number of sales will stay low, meaning that the property prices will stay stagnant for a long time to come. The availability of finance is, however, dependant upon the recovery of the financial companies from the recent credit crunch. That means the banks have to sort out their balance sheets before they can even think of increasing their lending activity.
The recovery of the banks can take a few years, and until then it looks like that we will see modest movements in the property prices. As long as irresponsible lending like bad credit mortgage products stay off the shelf, the liquidity will stay limited. This is perhaps a good thing in ensuring that we develop a stronger economy built on a stronger platform of responsible lending. But as far as the property market is concerned, don’t hold your breath for a sharp up turn any time soon.