Assetz® News - Brightoning up

Brightoning up

5th September 2008 |

When it comes to property investment, those who may think of buying property may have two questions just now. One is whether Britain really is about to endure a major recession, which could bring into question the wisdom of buying (though less so for long-term investors), while the other is that of where the good prospects lie.

On the first question, those who are long-termists may consider the worst-case scenario of recession and continued falling property prices to at least be an opportunity, as long as they retain the means, to buy when prices are cheap; in the longer-term expectation that prices will rise again as the economy picks up. If this is the outcome for the economy, such a strategy may be exactly what some investors do.

Against that, not all think it will be anything like as bad as the "biggest challenge in 60 years" Alistair Darling has spoken of. Professor David Miles, an economic adviser to Morgan Stanley, told the Daily Telegraph he was one such thinker this week. He suggested that the pessimistic views are based on an unnecessarily gloomy analysis of the economy. In particular, he suggested, a contrast between now and the painful recession of the early 1990s is that interest rates are expected to come down soon, whereas then they went up. (It may be remembered that Britain's European Exchange Rate Mechanism commitment to maintain sterling's value against the mark obliged the government to raise rates as high as 15 per cent before this policy collapsed in September 1992.)

Writing in the Independent, economic commentator Hamish MacRae also suggested Britain was better suited to weather the storm than some expected, noting that, among other things, the weakening pound will help exports.

So it may well be that the downbeat tone taken by some could be unjustified indeed, which could be good news in itself for investors. But the question of where the best places to buy might be could depend not only on which localities cope with the downturn best or recover fastest.

Other factors such a as sheer popularity of lifestyle may play a part. Today, property website Propertyfinder.com published its August search figures, which showed that Brighton was the location at the top of the list (of the rest, London districts occupied all but three places, with the others being Guildford, Manchester and Exeter).

Content editor for the site Michael O'Flynn said the reasons were easy to explain: "Its [Brighton's] enviable location, by the sea and yet within easy commute of London, makes it a magnet for people looking to escape from the capital."

He added: "According to figures from Brighton and Hove Council, Brighton recorded the largest percentage population change at +17.6 per cent of any area in the south-east between 1991 and 2006."

Such figures may make interesting reading for investors. If more people want to move to Brighton, then many could be looking to rent as well as buying - the sort of thing that could greatly boost buy-to-let.

Moreover, the chances of Brighton building many more homes for people to buy and live in as owner-occupiers are limited, since the sea prevents southwards expansion and the new South Downs National Park stops it building to the north. This may mean that demand exceeds supply, the sort of situation that could offer exciting prospects for investors.