No call to complain too much

Jun 25 2008 by Graeme King, The Journal

THE property industry in the North East needs to stay positive and keep doing deals, in the face of the negative attitude coming from the South East, says Ian Baggett.

WITH all the talk of credit crunch, energy crisis and inflation, it is important that we don’t talk ourselves into recession.

It may be harder for businesses and customers to borrow money but that does not mean it’s time to shut up shop and complain.

There are homeowners who are struggling with mortgage payments – but then there are more home owners than there have ever been.

There are buy-to-let investors who have over- stretched, but there are many more who have generated significant wealth in the last decade.

There are businesses that are struggling with liquidity, but our regional economy has never been stronger.

I know that, as a region, we have faced much harder economic circumstances than at present.

To those who recall genuinely tough times, the preoccupation with our current economic woes must seem particularly trivial. More recently, the threat of – and fight against – international terrorism has failed to bring about the economic downturn that many pundits forecast.

By comparison with the events of years gone by, a preoccupation with a 2% pa rise in the cost of funds and a more prudent approach by lenders is barely newsworthy.

On a national scale, the International Monetary Fund (IMF) reports that employment is high, corporate profitability is high and debt is low and 90% of investment is funded from retained profits.

Rarely reported, the IMF actually expects the UK to be the G8’s fastest growing economy in 2008. We are some way off a technical recession (where gross domestic product shrinks for at lease two successive quarters) and even such a state would not prove as catastrophic as some would have us believe.

It could be argued that my company’s sector, property, has been hit harder than most. Certainly house-builders seem to have lost a lot of customers.That said, those involved in property have enjoyed a sustained boom lasting more than a decade.

A correction has been inevitable and anticipated by most property professionals for a few years. We cannot really complain too much.

There is a great deal to be positive about.

Occupier demand has not faltered and the current downturn in the commercial property market is entirely due to price/yield adjustments. Many commercial agents in the region actually report an increase in occupier viewings when compared to this time last year.

There is a significant disparity between some of the gloomier headlines and what is actually happening, particularly here in the North East.

There is resilience in the regional economy that has withstood far greater challenges than those we are faced with at present. Let us not allow talk around the negative hype to become self-fulfilling prophecy – we are more positive and made of better stuff up here.

• Ian Baggett is managing director of Adderstone Group.