Who wants property market crash?


If the answer is ‘No one’ then you haven’t spent enough time on the internet. If you had, you would certainly have noticed that almost every national property market – commercial and residential – has at least one online lobby group salivating about the credit crunch. Read this story then get on to Google, and you will see what I mean.

The groups pray the current crisis, which is making much bigger headlines in the west than in Dubai, translates into substantial losses for home owners, investors and property funds alike.

Of course there is an entirely legitimate (and, who knows, possibly correct) analysis of the malaise now gripping the western banking system, which says that it will indeed tip over into national property markets and lead to wholesale catastrophe.

It clearly has already done this in the United States where some house prices have fallen by 40 per cent; it has done so in some parts of the Spanish market, too. Some could argue that the steep correction seen in the United Kingdom property market, where average returns have fallen from 18 per cent to zero in little over a year, is another example.

But I am not talking about serious analysts who happen to believe we are on course for a crash. Nor am I talking about traditional Marxists or others who have a cogent – if unfashionable – philosophical programme that says capitalism is in crisis. Whether these two groups are right or wrong, or win the support of many people, is neither here nor there. What is beyond doubt is that they are sensible people who argue their point well, drawing on expertise and evidence for their standpoints.

My beef is instead with the largely anonymous clusters of amateur bloggers and scarcely literate websites which have appeared in recent years in many countries.

Without the burden of good sense or any apparent knowledge of the property industry to weigh them down, their writers rub their online hands at any news of the latest banking crisis, an adverse price index or a suggestion that a market is falling. Having spent the past few years predicting a collapse of property markets – wrongly, of course – they now scent that if they repeat their pro-crash mantra ad infinitum, they may eventually be proven correct. So they adopt two tactics if facts get in the way of their dream.

Firstly, they dismiss as nonsense any serious research that suggests that property markets are more resilient than expected.

See, for example, the vitriolic online reaction of bloggers to recent reports that New York apartment prices were actually rising, that many European commercial property markets were quite healthy, and that house prices in the United Kingdom were not tumbling despite tightening mortgage lending.

Secondly, they berate any expert who ventures an opinion that some property markets are not collapsing. The amateur bloggers automatically dismiss these experts as being nothing more than mouthpieces for developers or mortgage lenders. See, for example, the way two leading TV commentators on the UK property market have been the subject of online criticism that is little more than personal abuse.

To this end the new-age bloggers and website authors clog up radio phone-ins and bombard online message boards, query the motives of experienced journalists and decry the accuracy of serious analysts.

Quite why these pro-crash bloggers and websites want a collapse is unknown. Their only success to date seems to be they have proven that a little knowledge – when combined with internet access – can turn out to be a dangerous thing.

What they may fail to realise is that in many countries, for good or for bad, many individuals’ principal current assets are their homes. Therefore any collapse in the value of these homes will bring short-term suffering to many ordinary people.

Likewise, for good or for bad, many corporations hope to provide these same individuals with adequate future pensions for their hopefully long retirements, by investing now in property funds.
Therefore any collapse in the value of these funds will bring long-term suffering to those same ordinary people.

The people who will suffer least in any crash are likely to be the wealthiest, who have the expertise and the power to shift investments to other countries that are safe for investments or other sectors to avoid substantial losses. In the end, this is the group that the pro-crash lobby is letting off the hook, while condemning millions of others to financial hardship.

Will the bloggers care? I suspect not. Should we care about such
bloggers? Not at all.

But we should at least recognise their existence – and whatever happens with property markets around the world, we should dismiss them as the amateurs they are.

(Graham Norwood is property correspondent of The Observer.)