What will happen in 2009?
1. In the UK economy? Well, these are exceptionally hard times. We are probably around half way through the current crisis - which has been going on already over 18 months. So we can expect a tough 2009 and things to start picking up in 2010. Companies that shed staff early and have conserved cash will do well in the upturn: lean and fit and with finances available to buy up other companies or assets at knock-down prices. A lot of fuss has been made about the fall in the pound but this will be really good news for any company that sells goods or services outside the UK, and will also mean that people spend more at home whether on holidays or other things.
2. The UK housing market... should we sell up or stay put? Is renting a good option right now? Will housing become realistically affordable again? Each person's situation is totally unique but here are some general thoughts. The house market is likely to continue to fall sharply, but will eventually bottom out. The lower the falls are, and the lower mortgage interest rates go, the more likely it is that we will see a rebound and a strong recovery, as many people decide to come back into the market or to enter for the first time. A lot has been written about mortgage markets changing forever, but that is unlikely. The fact is that the mortgage market will eventually settle down, and will become attractive and competitive again. Once lenders become convinced we are in the early stages of a long and strong property price recovery, we will see loan to value ratios become more relaxed, and the return of 90% mortgages. Home loans are the largest and most important financial transaction most people do in their lifetimes apart from personal pensions, and so will become once again a very important part of retail financial services.
"Retail jobs will be very hard hit in January to June as the reality begins to hit home. McDonalds, Lidl and others trading towards the bottom of their markets will continue to do very well. The jobs market in many sectors is surprisingly strong with 850,000 vacancies that are officially known about in December 2008. In previous downturns it has been unusual for well motivated and talented people to remain out of work for more than a year."
"These things are just cycles. We are just about to enter a new cheap credit boom, fuelled by the lowest borrowing costs in living memory. The result in the medium term is likely to be another overshoot, high inflation, high interest rates, eventually leading to another crash which could happen by 2015. As we have seen - swings can happen very fast from one end to the other."
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