How the UK economy is shaping up following the pandemic
What might it mean for the housing sector?
Economists are confident that despite a “softening” of the housing market for the remainder of 2021, the outlook appears positive despite issues around supply and employment.
Speaking at Housing 2021, the Institute of Director’s Chief Economist Kitty Ussher said there were indications that the end of furlough would not lead to a significant jump in unemployment and said she was less worried than some quarters of the media about rising inflation.
In the longer term, she argued, labour shortages could lead to higher GDP growth as the cost of employment could lead to greater capital investment.
But according to consultant economist Professor Trevor Williams, the new-build housing peak in 2019 may only be reached again in 2025 as the effects of the pandemic continue to hang over the sector.
Big house price fall “unlikely”
David Smith, Economics Editor at The Sunday Times, said while the course of the pandemic remains uncertain through autumn and winter, a big fall in house prices looks unlikely, “making this the oddest economic and housing cycle in history.”
He also believes that the “working from home” agenda will soften as more employers recall staff to workplaces and people that moved during the pandemic “may discover that they have made the wrong choices.”
With house prices unlikely to fall back – if at all – Professor Williams suggested that the only way government could hit and maintain its 300,000 new homes a year target would require non-profits, such as housing associations and local authorities, to develop more.
“In 2019 the French built 50% more housing than the UK, and in Germany they built 30% more housing than the UK,” he said. “Here in the UK we are awful at building enough good housing for our population, but it can be done.”
He argued for raising the local authority borrowing cap, development of new garden towns, more support for self-build and a government investment in housing of 1% of GDP.
Reasons to be optimistic
Kitty Ussher was the most upbeat of the panel. “Confidence has returned, the public have some savings and government spending is strong,” she said.
In the longer term she believes digital adoption – accelerated because of Covid – may lead to better productivity, and more flexible working could result in greater labour market participation, pushing down on unemployment.
With greater tax-and-spend coming down the pipe, including a 7% rise in corporation tax from April 2023 already announced, it’s unlikely the pandemic will result in similar austerity measures seen after the 2008 financial crash.
Please Note: Every care was taken to ensure the information in this article was correct at the time of publication. Any written guidance provided does not replace the reader’s professional judgement and any construction project should comply with the relevant Building Regulations or applicable technical standards. However, for the most up to date LABC Warranty technical guidance please refer to your Risk Management Surveyor and the latest version of the LABC Warranty Technical Manual.