This week, we were again privileged to hear the latest thoughts from our friendly behavioural economist Roger Martin-Fagg.
Roger uses his study of human behaviour to predict economic trends, and the impact they will have on UK industries. Regular readers will remember me saying that Roger describes himself as being “…broadly right, the majority of the time…”, and his predications for the last year or so have followed this pattern, despite many of them not being widely held views at the time!
According to Roger, the majority of people like to be in ‘monetary equilibrium’, meaning they know roughly what they want to see in their bank account each month, and if they have less than this amount they cut back on things, but if they have ‘excess’ money in their accounts they feel the need to spend it!
Between the furlough scheme and people’s inability to spend money going out, on holidays etc, many individuals have found themselves out of equilibrium and are now spending at an increased rate.
Globally, there is currently $6 trillion of savings available to be spent (that’s more than double the size of the entire UK economy!), and Roger is expecting this to translate into a global boom!
Although not across every industry, most businesses are already currently experiencing a mini boom as people start to spend the money saved up during the series of lockdowns experienced over the last year, and according to Roger, this trend looks set to continue into the Autumn.
Locally, we are seeing demand across a wide range of industries, and in particular, a continued extraordinary demand for all types of holiday accommodation, driven by people’s inability (and desire) to go abroad (although even as I write this, there may be good news ahead for those who do want to travel with several more countries making onto the ‘green list’!).
The flipside of course, is that the sudden upturn in business means many companies are finding materials and products are in short supply, and trying to recruit extra help to cater for the increased demand, is almost impossible.
Where companies are able to get hold of products, they are often accompanied by large price increases (coffee is up 51%!), which will almost certainly have to be passed on to the consumer.
This could translate into increases in inflation, and in turn interest rates, although Roger is suggesting these will not be significant increases, as price growth starts to stabilise.
Supply, Demand and House Prices
There has been no end of commentary about the increased activity in the housing market, but to put it in context, the current number of property sales nationally is up nearly 40% on what is considered the monthly ‘norm’!
Coupled with the extremely low volume of new properties coming to the market, and it is leading to some of the lowest levels of available of properties for sale that we have seen in years, all at a time when people are looking to spend!
The resulting imbalance in supply and demand means that when those new properties do come to market, many sales are forced to go to ‘best and final offers’ with multiple interested parties all seeking to buy the property. This of course leads an increase in house prices.
This time last year, Roger was predicted upwards of a 7% growth in house prices (even when others were predicting a 3% drop!), and nationally this has proven to be the case, with many areas experiencing 10% or more. He is predicting further growth during the remainder of the year, although not to the same degree.
Locally we have also seen some areas where property prices have risen by 10% or more, with a few of the hotspots achieving 20% above where we were prior to the first lockdown.
It is true that some of the properties are being bought as second homes, but not anywhere near the 80% (!) rate recently suggested in the house of commons. Indeed with 9 offices situated throughout this wonderful region, we feel we are in a good position to comment on these numbers and would like to suggest the true number is less than half this figure!
However, it is even more important to note, that whilst some of these properties are being bought by people from outside the area, they are not just being purchased for holiday use, but also by families who have decided to come and live and work in the area, and become part of wonderful local communities who enjoy this beautiful part of the world.
Whether Roger is once again “broadly right” remains to be seen, but certainly his predictions provide us with an optimistic picture to look forward to!
As ever, if we can be of service, whether you are looking to buy, sell, let or rent, please do not hesitate to get in touch with one of the team.
Hackney & Leigh
Caring about you and your property.