The Property Industry’s Role In Recovering From A Recession
The UK economy swerved a double-dip recession earlier this year, but still shrunk at its fastest rate in 300 years. Boris’s update and his roadmap to get us out of lockdown announced on 22nd February, and Rishi’s budget on the 3rd March have both been warmly received (well depending on which newspaper you read) with growing optimism for the future!
But what role will the property industry play in the recovery?
The extension to the stamp duty holiday was welcomed, as this has kept the property market buoyant over the period, along with Rishi’s furlough billions of course, with new homes selling at their fastest pace since 2007!
The housing industry has often led the way out of recessions as recessions lead to interest-rate drops that lower borrowing costs for both homebuyers and builders, spurring homebuilding and the many related industries that drive GDP growth.
The last recession was in 2008/09 and the property industry wasn’t a key driver to recovery then, but this recession is very different. “Before Covid borrowings were not off the chart, economic growth was healthy, and both unemployment and inflation were low, unlike during the previous recession.” - Trevor Abrahmsohn, MD of Glentree Estates.
Nick Leeming, Chairman of Jackson-Stops, remarked “The property market has proved resilient post the market reopening in May 2020 and buyer confidence is still high. As soon as estate agents were given the green light to return to work, we saw the pent-up demand from when the market was closed translate almost immediately into sales. This, combined with the stamp duty holiday and many buyers wanting more space in their homes following the lockdown, is causing a spike in transactions across our network.”
In a report by Wells Fargo & Co published earlier this year, they noted that “residential construction remained one of the few bright spots in an otherwise terrible 2020. Even as overall economic growth has slowed over the past few months, residential activity has continued to heat up. During November, single-family starts climbed to a 1.186 million-unit pace—the strongest in over 13 years.”
And they forecast that “This residential sector activity will extend into 2021. Mortgage rates are likely to remain very low compared to historical norms, even as Treasury yields have moved higher on the back of positive vaccine news. What’s more, there is a ready-and-waiting wave of Millennials who are now reaching a family-forming and home-buying age. There are some supply chain challenges tied to COVID outbreaks, but still, there is a structural shortfall of homes for sale, and the mismatch between scarce supply and robust buyer demand sets the stage for home building to continue to climb higher in 2021.”
Which is good news for the recovery!