A recurring theme in this column has been that, over time, the tectonic plates of power are moving. In real estate this means that in good times and bad, the power of property is inexorably shifting from 'traditional' regions like western Europe and the US to 'emerging' ones like eastern Europe, the Far East and the Middle East. Over recent decades Dubai's emergence has been a symbol of that move, and even short-term slowdowns will not make a long-term difference to this overall trend.
A snapshot of what is happening in central London proves that such a shift of power is continuing unabated, even with a whiff of recession hanging over UK markets.
Indeed, it is the weakness of the UK economy that is, to some extent, accelerating the trend as foreign purchasers see the opportunity to buy into UK property. Some calculate that a 20 per cent fall in UK prices thanks to the downturn and a 20 per cent-plus fall in Sterling have meant homes becoming 40 per cent cheaper for foreign buyers since 2007.
Many experts say the combined low value of the pound and recent fall in real estate values mean we are now seeing the start of a repeat of the events of the early 1990s. Back then it was investors from Hong Kong, and Singapore in particular, who cashed in on cheap UK property – now it's from the Middle East.
"Then, almost overnight, the devaluation of sterling and the reduction in property prices made London a cheaper place to buy," I am told by James Geddes who heads the Middle East team for Property Vision, a buying agency based in London.
"The number of Middle Eastern buyers registering with Property Vision is fairly constant year on year. What is different is that in 2007 no one was interested in buying in the UK due to the property market peak and the weak US dollar. However, recently I have seen a much stronger interest in the UK market due to the reversal of these two factors. In December, 80 per cent of the people we spoke to in the Middle East were interested in UK property, most of them looking to buy this summer" he says.
But opportunistic investors with an eye for good value homes may have to be quick, as an increasing number of media pundits say while the UK commercial market looks set for a poor 2009, residential prices may spring back sooner than expected.
A new survey by Lombard Street Research (LSR) claims that, in contrast to reports from other business analysts, house prices in the UK are now officially 'affordable' again. This means that when comparing house prices to other financial indicators – earnings, mortgage rates and so on – residential property is roughly at its long-term position of 'fair value'. LSR says prices may even start rising by the year-end.
There is a similar analysis offered by Rightmove, a UK property sales website that provides a monthly snapshot of buyers and sellers.
It says the number of new vendors putting their homes on the market in the past month has more than halved from 89,000 in January 2008 to 43,000 this month. Buyer registrations, by contrast, soared to 429,560 this month compared to 199,762 in January 2008.
Rightmove's economists claim this marks a difference from the last UK residential downturn of the 1990s, when supply fell and demand rose more slowly. Could this mean, the website asks, that average asking prices could rise in the next few months?
These analyses could be a flattering interpretation of a few less-bleak figures by optimistic commentators, hoping that after 15 months of gloom there may be light at the end of the proverbial tunnel.
Certainly such optimism does not take account of one major factor – that is, most of the UK's domestic buyers and investors cannot buy even the newly-affordable property because of credit rationing by banks.
But therein lies the excitement and unpredictability of the current property market. Because as soon as banks relax their lending, so demand will spring back and LSR's prediction will come true – perhaps even sooner than expected. That means the Middle East interest in buying into cheap UK property may have only a few months to run its course, before prices rise again and cease to offer the bargains that they now represent.
This is still a minority view and most economists say UK residential values have at least another 10 per cent to fall while commercial prices may plummet 20 per cent or more in 2009.
But if the optimists prove to be right – and it is a large if, of course – there are just a few months to come to the UK for a bargain. Watch this space.
- Graham Norwood is a property correspondent for The Observer