Fear of a rising market

Sometimes it's good to get a different perspective on things. So, in the interests of investigative journalism of the old school variety, I have spent the weekend playing golf in Portugal. An odd way to uncover the latest goings on in the UK property market you might say, except for the fact that the majority of my playing partners just happenend to be property developers, architects and surveyors. And every one of them owners of UK property.  "So exactly how precarious is the UK market at the moment?" I ventured, a little provocatively perhaps, but in light of the imminent breakdown of the Eurozone, I felt justified.
 
I was prepared for a partisan response, but was completely taken back by the unanimous and overwhelming rebuffal my question illicited.
 
"The problem right now," they told me, "is not a fear of a falling market, but of a rising one."
 
For it seems that one of the less anticipated (and yet obvious when you really think about it) effects of the current economic climate, is a huge influx of cash into UK property, which has literally mopped up the weak trickle of supply available.
 
"But surely," I asked, "it`s still a buyers market isn't it?"
 
The answer it seems is that in principle it should be, but as soon as any half decent properties come onto the market they are being snapped up by foreign buyers (the sort with large suitcases full of cash).
 
Buyers from the Middle East, Russia and Asia are apparently the most active and such is the ferocity of their interest that many properties are being siphoned off by agents well before they get anywhere near the mainstream marketing machines.
 
It seems that just as gold becomes a popular asset in troubled times, so does UK property, particularly for foreign buyers. But, and it is a but which I have stressed many times before, only in the sort of areas foreign investors have traditionally found appealing. Central London being the most obvious choice, closely followed by choice city residences in such locations as Bath, Bristol, Oxford, Cambridge and Edinburgh. As one architect explained, "When the proverbial hits the fan, UK property is seen as a safe haven and when the money is coming from abroad it quite often goes to areas which the investors (many of whom were educated in England or have spent time working there over the years) are familiar with. Hence the popularity of the University towns and cities as well as London."
 
As to whether this will cause a bubble in the overall market (the average price of a house went up by 10 percent in the last year, but in prime areas such as these by much more) I doubt it. The Eurozone may have problems, but at least the medicine to fix those problems is being administered by most governments in the form of austerity measures which in my opinion will see steady but unspectacular economic growth over the next few years.
 
However, if you happen to have an inside track to a reliable agent, a suitcase full of cash and a working knowledge of some of the UK's university towns, you can expect a continued lack of supply to boost prices by at least 20 to 30 percent over the next three years. Not a bad option in troubled times like these.