It was time to take a trip over the pond to Ol’ Blighty….to see some friends and reconnect with colleagues. After having worked in the London property market for five years, and been away from it during the past two turbulent years, we were interested to see how the country had coped with the austerity measures put forth by the coalition government and wondered about the true sentiment of the economic environment.
We are so pleasantly surprised that the general consensus is positive..almost optimistic! Colleagues in the property industry are busy, land is being purchased and developers are starting to get their projects underway. Just this past week The Bank of England resisted increasing the interest rate for the 27th month in a row as it holds steady at 0.5 percent. Economists predict that this rate will not inch forward for several months and some even speculate that a significant rise won’t be expected until 2014. We would expect the housing market to begin to grow steadily and in metropolitan areas such as London, there is a buzz in the air! Yet a few factors are keeping people from getting carried away a la 2005. Firstly, banks are extremely cautions with the money that they are lending to private individuals, though the same could be said for US based banks. Yet the UK is grappling with a few other factors, first is the rise in inflation, which the Retail Price Index reported inflation at 5.2 percent in April 2011. Mark Giddens, partner at UHY Hacker Young commented, “The amount of money eroded away through inflation is staggering”. Nevertheless, consumers are confident in the future, as a survey conducted by the Bank of England found that households expect inflation to ease over the next year as the public perceives that inflation will drop to an average of 3.9 percent over the next twelve months.
A secondary factor keeping things on course is the government imposed rise in VAT (value added tax) that is imposed on all goods and services purchased in the UK. The VAT increased from 17.5% to 20% in January 2011. When first imposed there was a national outcry that this increase would curb consumer spending to such a degree that the country would fall deeper into the black hole. Six months later we have witnessed that consumers have returned to their normal shopping habits, as the British Summer is underway and the high streets are packed!
Visiting our favourite shops and in speaking with friends the general consensus is that so many British people are just plain tired of the doom and gloom rhetoric and now that the press is starting to finally report some positive news, everyone is feeling a sense of relief. The country has made adjustments and has gone through a difficult economic period but now things are changing, the job market is growing and publics resilient spirit has reason to celebrate.
We are off to the shops to do more market research!