As Christmas approaches, our thoughts turn to next year and what may happen. There are two central tenets to Economics; Supply and Demand and Expectations.

Many will be familiar with the concept of Supply and Demand but our interpretation of it is wrong, especially in property. Few properties are homogeneous and whilst there is a large overhang of supply, in virtually all property sectors, few landlords are willing to sell at the price which correlates to demand. Thus we have an imbalance between the supply and demand curves, where they do not currently meet and are almost parallel.

Where you are on either of these curves depends on your expectations; expectations are what people expect will happen. In boom times, prices go up because people think they will and it becomes a self fulfilling prophecy and vice versa in a recession. At present we are in a recession, despite the fact that not much has really changed over the last four years, banking issues aside: Local Authorities, Governments, Quangos are all spending more this year than last year, there are no massive jobs losses and the economy only shrank by 4% (Are you noticeably poorer with 96p in your pocket as opposed to £1?- nope)

If we can change expectations, and this is the responsibility of government and the media, then we will pull out of this economic contretemps quickly.

If government wants to move the economy forward, it should recognise the importance of property in the economy and rather than QE, (which really makes banks and bankers richer and exacerbates  a bond, stock and commodity bubble) they could buy real estate and get us moving again: get rid of the auction overhang and let the Supply and Demand curves meet again. Then we will all be back in business.