After much speculation, the preliminary estimate from the ONS has confirmed what we feared – that the economy dipped back into recession in Q1. This is obviously not what we wanted to hear, however what is the actual impact on our daily lives? Most of us have managed to survive the first quarter of the year without realising that we were in a recession, so why should our attitudes change in reaction to a retrospective statistic?
The main likely impact will be psychological and, at least initially, likely negative – but should we be worried? For the average household, the economic reality has not changed – conditions remain difficult and there is ongoing concern about finances and, for many, job security whether we are technically in recession or not. Similarly for businesses, trading conditions are far from easy. Moreover, the scale of the contraction in GDP is relatively small at -0.2% and subsequent revisions to the preliminary estimate may deliver improved figures.
The impact on the housing market should be minimal. The negative forces which are depressing the market have been with us for some time – namely affordability and availability of stock in both the sales and lettings sectors. Arguably the key factor is also the most fragile – confidence: slow to build up and quick to evaporate. So should we be less confident about the housing market? Well, if we look at Land Registry data for the three months from December 2011 to February 2012, average prices rose by 0.74%, whereas in the corresponding period a year earlier (when the economy was not in recession) average prices fell by 0.65%.
We should not automatically recoil in terror at the mention of the word recession but rather look at the detail in terms of scale and how or whether our lives have actually changed during periods of recession.
With regard to the housing market, according to data from HMRC Q1 saw the highest first quarter transaction volume in the UK since Q1 2008 – a total of 198,000 transactions were recorded which was 14.5% higher than in the first quarter of the previous year. In line with the HMRC stats, Chesterton Humberts has also experienced increased buyer interest and sales activity in the country property market so far this year. Maybe a small dose of recession is not so bad for the housing market after all?
About Nick BarnesHead of Research – Chesterton Humberts
Nick has over 20 years experience within the property research arena, having worked for DTZ and Knight Frank before moving to Chesterton Humberts to head up the Research Department. His career has covered both the commercial and residential sectors in the UK and international markets and includes market research covering investor and occupier markets. He has additionally provided bespoke consultancy services for major investors, developers and lenders.
Nick is passionate about research, without which he believes it is not possible to take balanced decisions regarding any property transaction. It is his long term aim to try to help elevate residential property research up to the same standing as that of the commercial property sector.
Outside of work, Nick is equally passionate about sport and photography and is partial to the occasional glass of red wine!