Investors Chronicle - Britain's divided property market

Investors Chronicle - Britain's divided property market

The raw materials of property are not bricks and mortar, but debt and equity. Forget demand for and supply of buildings - property performs well when money is loose, and badly when money is tight.

This rule of thumb may be simplistic, but it does a surprisingly good job of explaining performance over the past decade. As we all know, debt was easy to come by until 2007, stoking strong gains in all things property-related. Then debt was abruptly withdrawn, sparking a sharp correction. Finally, after unprecedented interest-rate cuts and quantitative easing, equity returned, but only to those parts of the market it perceived as reasonably safe - anything in central London, and elite properties elsewhere. So the market split into the equity-dependent best, which bounced, and the mortgage-dependent rest, which continued to fall.