Storm Imogen rolled eastwards across the UK this week, bringing 96 mph winds, 20 metre waves and severe weather warnings from the Met Office. As the clouds drew in on Monday, so too did grey news on the economy – with numbers to match.

Stamp duty revenue on London homes has dropped £105 million. Shares in the UK’s biggest REITs have fallen by as much as 20 per cent in the past three months. Hedge funds this week took up short positions on the London residential market.

All this follows a crash in global oil prices, the slowdown in Chinese growth, and the knock-on effect in stock markets worldwide. Today, City A.M. reported that around $1.2 trillion has been wiped from markets since Monday, including the Dow Jones and FTSE 100.

The previous crisis was of course triggered by the collapse of the US subprime mortgage market, and this week Fitch reported that home prices in San Francisco are currently 16 per cent overvalued and unsupported by area income. Does all this feel reminiscent of 2008?

No. The drop in UK stamp duty revenue arguably owes to tax increases, a shortage of supply, and tighter (and hopefully more prudent) mortgage lending rules. Fitch reports that the wider US housing market is “generally sustainable”. There was also positive news on retail performance this week, for example, and lower oil prices are boosting household disposable income.

As ever, there is a real risk in this debate of talking ourselves into a downturn. By focusing disproportionately on negative indicators, we are in danger of voluntarily stoking the fire of risk and diminishing confidence. George Soros has highlighted the danger of ‘reflexivity’ and it's possible that a crisis in markets could drive a crisis in the ‘real economy’ which is performing relatively well.

While there may be some stormclouds ahead, we are learning some lessons from the past and there’s evidence that the property industry is arming itself with sturdy umbrellas to combat the drizzle.

Today Grosvenor revealed that it has put in place contingency plans for a 40 per cent fall in property values and a two-year freeze in debt and transaction markets. Group finance director Nick Scarles wisely notes: “It’s during the boom that the crash is lost or won.”

Estates Gazette editor Damian Wild adds that “The crisis is still seared on the minds of the market.” There is a sense that the property industry has a far greater awareness of the risks, challenges and uncertainty that could – at some unknown point – arise in the UK. We can plan and prepare.

The UK property market has also become more dynamic over the past five years – PRS, shared workspaces, the rise of niche asset classes – this greater variety should create a more responsive and therefore resilient market.

Let’s hope such developments can help us focus on what’s really going on in the ‘real economy’, rather than agglomerating pessimism and fear. We must not underestimate risk, but it’s dangerous to be ruled by it. So I’ll be taking my umbrella out with me this weekend, but still looking for a sunny day.

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Alexander Hall, Senior Account Manager

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