-0.2%! Pheweeee!

Mark Posniak - 25 January 2012

OK, so the number everyone's been waiting for is out. In the event, it was bad, but not as bad as some had feared. The UK economy contracted by 0.2% in the final quarter of 2011 - middle of the range.

Bizarrely, it may seem, the Pound strengthened on the news and there was little movement in the markets. It goes to show how serious things are when the markets take heart from a contraction in the economy of 0.2%. But that's the times we're in.

Only last night Sir Mervyn King touched upon one of the major reasons for the ongoing low (well, negative) growth environment in which we're mired. Speaking in Brighton, he said that: "Households as a whole have been net savers, rather than net borrowers, for each of the past three years."

Consumers, in other words, are being cautious, perhaps more cautious than ever. And it's exactly this caution that has put the brakes on large parts of the mortgage and property markets.

But can you really blame people for this caution? The current environment, with a contracting economy, still high inflation and rising unemployment (not to mention a Eurozone on the brink of implosion, alluded to in this morning's Bank of England minutes), hardly inspires people to upsize and commit to a higher monthly mortgage payment. Instead, they're choosing to sit on their hands and wait for things to improve.

Unfortunately for the mainstream mortgage industry, this latest GDP number will likely see this trend of caution continue, if not accelerate. Purchases are likely to be put once again on hold. The fact that inflation is falling means rates could stay lower for even longer, too, which will potentially hit the remo market. But at least buy to let could benefit, as the masses of people unsure about buying continue to rent.

So, while the owner-occupier market looks like it could be in for a tough time during 2012, it's a year shaping up to be a time of opportunity for property investors and the brokers that work with them. Falling house prices (and they are likely to fall further with today's data) will throw up no end of bargains while consumer caution will mean rents continue to stay high.

It's a bad market, yes, but there's still ample opportunity for those who grab it by the scruff of the neck.