Consumer confidence slides in February spelling potentially bad news for property market

UK consumer confidence took a hit in February falling to the lowest level in over a year, a survey from pollsters NOP GfK – conducted on behalf of the European Commission – showed recently. The reasons for the slump includes concerns on the debate over remaining in or leaving the European Union combined with evidence of global growth wobbles driven by China.

“Despite the positive impact of continued low interest rates and subdued inflation on our day-to-day household budgets, the feeble outlook for growth and a variety of economic uncertainties since the start of the year has depressed our New Year optimism,” said Joe Staton, Head of Market Dynamics at GfK.

These two significant developments means Britons felt less confident in February this year than they had since January 2015, despite continued low interest rates and rising employment. Additional details in the survey showed that UK consumer’s confidence over the British economy in the next 12 months slid, as did their confidence over making major purchases, which includes buying a house.
While this measure isn’t the only indicator of confidence in the UK it is a key one and suggests the UK’s housing market could suffer as people think twice about making such a major purchase due to concerns on other matters, including the outlook for the British economy.

The reason that concerns over Europe and the economic fortunes of the country - despite steady earnings growth and rising employment - could result in a slowdown in the UK’s currently buoyant property market is because when people are worried about a change in the UK’s economic circumstances they start to worry about the security of their jobs and whether or not their earnings will rise.
It doesn’t matter if jobs growth is the strongest it’s been for years or that unemployment has fallen for the past 12 months. When it comes to making a major financial commitment, if people are worried about the future potential to do that, they begin to feel poorer and put off making expensive purchases – and what is more expensive than buying a house?!

According to the most up-to-date official Government figures there were 105,940 UK residential property transactions in January this year. That’s down from the 109,020 transactions in December 2015 and compares with 96,600 residential property transactions made in January 2015. It’s difficult to say whether the drop in recent months is because the January figure was particularly high, it’s a seasonal movement or if potential home-buyers are losing confidence – only a careful eye on the market in the coming months will be able to give an insight there.

Another development which could stem housing transactions is further increases in house prices. While low mortgage rates are supportive of the housing market, they can only help so many people when prices keep rising further out of reach.

Put together then, all the evidence suggests that if property transactions do slow it will be a combination of important news and developments that lead to that result - not just a single event.

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