Valoran Real Estate Brokers Issue No. 3 - Mar 2013
moved each year choosing or more likely being forced to stay put – 2.5 million fewer transactions over the course of the downturn. The negative impact on the UK economy is severe, with an equally significant but less quantifiable social impact on frustrated families. In the new build market, delivery means increased volumes of supply from house-builders and developers. Constrained demand at one end, combined with the continued squeeze on construction input costs, has made it challenging to achieve higher rates of construction. The House Builder’s Federation (HBF) estimates that even in a crisis state the housing market contributes 1.5 direct and three indirect jobs for every home completed; it also contributes circa three per cent to UK GDP. No Government drive to support the housing market will make much difference while the macroeconomics remains as uncertain – and unpredictable – as has been the case over the past few years. Uncertainty weakens demand, forcing consumers to delay large expenditures (such as home moves) until there is greater confidence about that expenditure being worthwhile. A year ago, there was conservative optimism that UK PLC was heading for a slow, steady improvement. A double dip later and we are now waiting to see if the released GDP estimates (up
12
one per cent according to The Office of National Statistics) are simply the result of an Olympic spending anomaly or the start of a longer-term improvement. Very little has changed on the economy, with a regular sway of crises followed by fiscal pacifism that seems likely only to prolong the Euro zone problems rather than to solve them. According to the Office for Budget Responsibility OBR), consumer spending levels will increase by only 1.3 per cent in 2013. On the flip side, the Confederation of British Industry (CBI) expects a return to positive real incomes next year (wage growth minus inflation) for the first time in four years.
All of this combines to suggest that the housing market has downside risks but next year there is room for moderate improvement. However, our marginally positive outlook reflects our view that on balance these risks are not expected to fully materialize.