As 2007 ends, we look back at the year that was 2007!

Hi Readers

I don't know about you, but I cannot believe it is christmas in just over 3 weeks! Time really flies these days....Anyway.....We are going to take a very brief look back at the property market in 2007 and look briefly ahead to 2008.

I think 2007 will be remembered solely for the collapse of the american sub-prime lending market and the global credit crunch that quickly followed. There is no doubt that this event nearly brought the global financial markets crashing to their knees. It certainly has proved a death knell for poor old Northern Rock and who knows if they will survive or become one of the most catastrophic collapses for a FTSE 100 listed company in UK history. Whatever happens to Northern Rock, the future and well being of the Bristish Economy and the UK property market firmly lie with the Bank of England, interest rates, the rate of inflation and the price of crude oil.

It has been noted by HSBC recently that if the UK property market is to avoid a price crash, the Bank of England will have to aggressively cut interest rates by 1.25% to 4.5% by the start of 2009 in order to make sure the property market remains buoyant. But there is another side to this....

The Bank of England are expecting to drop interest rates as early as next February with further falls planned for later in 2008 BUT only if the Bank of England's inflation targets are met. If inflation increases above its target rate, then interest rates may be kept at 5.75% or may only fall gradually by 0.25% or 0.5%.

The rate of inflation very much relies on the price of crude oil and if a barrel of crude increases, the cost of a litre of petrol at the pump increases and the costs of transportation and manufactoring for businesses increase,businesses then hike up prices for goods and services to cover these extra costs, which means higher costs for consumers, and in turn the rate of inflation rises. As you can see, the current rate of inflation depends a lot on the price of crude oil, so my advice for property investors out there is to keep a very close eye on this over the next few months....However, the good news is that the price of a barrel of crude oil has dropped to $90 after the US said they had larger than expected oil reserves, but this will need to be watched carefully in the coming months.

So as you can see, the uk property market and the economy are going through uncertain times and in my opionion, confidence will only return to the property market if the Bank of England drops interest rates to 5.0% or below, but we will have to see what will happen in the next 6 to 12 months.

Ok a quick look at 2008.....This is a difficult year to predict as any stability, confidence and growth in the property market will all depend on the Bank of England dropping interest rates so that confidence can come back into the market. However, I feel that property prices will remain largely steady with any growth confined to the north and in particular Scotland.

Ok, that wraps up this post, so I hope that you all have a great weekend and remember to keep a very close eye on the price of a barrel of crude oil and the rate of inflation as these two factors will determine how rapidly the Bank of England will drop interest rates in 2008.

Until next time, invest wisely

Take Care

Grant Delmege

Zone 4 Property

http://www.zone4property.co.uk