Released on: September 21, 2007, 7:59 am

Press Release Author: Jimwatson

Industry: Real Estate

Press Release Summary: Back in the early 1990s, Britain was in recession. Interest
rates were held artificially high as Britain tried and ultimately failed to keep the
value of the pound within its agreed parameters against the German Mark under the
auspices of the Exchange Rate Mechanism (ERM). Unemployment was high and the word
repossession was constantly in the news.

Press Release Body: Back in the early 1990s, Britain was in recession. Interest
rates were held artificially high as Britain tried and ultimately failed to keep the
value of the pound within its agreed parameters against the German Mark under the
auspices of the Exchange Rate Mechanism (ERM). Unemployment was high and the word
repossession was constantly in the news.

It all added up to a period of severe difficulty from which the UK emerged after
leaving the ERM, with interest rates cut and the housing market, once blighted with
negative equity, subsequently soaring as prices have risen, thanks not just to a
growing economy but also to shortages of supply and buy-to-let investors .

That, of course, is the record of recent history. But the question many have asked
was, when and how would the housing boom end? The answer to the question of when
appears to be now, with house price inflation stuttering to a halt and even falling
in some regions. The how is another matter, split between those who believe the
market will have a soft landing as it corrects itself before starting to grow again,
while others take a more gloomy view.

Among those with long memories is Vince Cable, Liberal Democrat treasury spokesman,
who said this week at his party\'s annual conference in Brighton that the housing
market had experienced a \"collective madness\" which would soon end in tears.
\"History tells us that bubbles burst; and every housing boom is followed by a crash
whatever the papers say,\" he said.

This warning of imminent bust is perhaps the most gloomy prediction around, but
others have not ruled out the possibility that the early 1990s will be repeated. The
Royal Institution of Chartered Surveyors has said there is a one-in-ten chance of a
repeat of the early 1990s, when property prices fell 35 per cent from their 1989
peak.

Others disagree, such as Peter Damesick, the head of UK property research at CB
Richard Ellis. He said the chance of such a crash was \"pretty small\" given that
interest rates were lower and the economy is clearly not in a downturn.

The question buy-to-let investors will ask is what impact a downturn, whether a
gradual slowdown or a major crash, will have on their investment.

Not much, according to Malcolm Harrison, a spokesman for the Association of
Residential Lettings Agents (Arla). He said that if anything the industry should
benefit, \"because buy-to-let is quite predictable, in that if there is a slow-down
in house prices you know there is going to be more rental demand, and that always
means the case of a thriving rental sector\".

Thus, Mr Harrison added, buy-to-let rental demand will \"only increase if house
prices do drop\". With that assurance, investors may regard any downturn in the
market as a major opportunity.

Earlier today, the Bank of England published its minutes for the September monetary
policy committee meeting, showing a unanimous vote to hold rates for the second
successive month. Given this week\'s inflation figures, showing a further fall in the
Consumer Prices Index to 1.8 per cent, it may even be that, rather than the early
1990s, the bank has, as Royal Bank of Scotland economist Ross Walker told Reuters
yesterday, \"leeway\" if it wants to cut rates. All this suggests times now are very
different from the early 1990s, times in which the buy-to-let industry which barely
existed back then may have a chance to thrive now.

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