Greengates Builders Merchants

Greengates Builders Merchants, Lancashire Hoping England Recovers From The Recession

Positive Growth Predicted

Hopefully we are seeing the UK coming out of the worst recession since the war. It is widely predicted that we will soon see a positive picture in the economy due to a number of factors, including inventory cycles, fiscal spending plans and a year where an unprecedented number of people holidayed at home. What is encouraging is that a number of economists are predicting that this return to positive growth will continue for the foreseeable future. It does however need to be noted that the last few recessions have also seen periods of positive growth followed depressingly, with quarters of negative growth. Again, where there seems to be a consensus amongst economists is that growth is expected to be weak. This is attributed in no small part to the exceptional levels of debt we carry. UK household debt is the highest in the world. This boom in debt fuelled the housing market.

 

The Rise and Fall of Property Prices

In the period between 1996-2007 house prices rose by an amazing 350%. Since this time property prices have fallen 20-30% and, as economic growth closely follows the housing market it is clear that, with very little property price growth expected, the recovery may be a long haul. Property prices took ten years to recover from the last decline in 1989. We note with some caution the recent announcements that property prices have increased.

In addition to the household debt, government borrowing is set to soar to a predicted level of £700 billion over the next five years. This cannot be sustained and, therefore, debt has to be brought down. If we discount hyperinflation as an option then we have only two ways to reduce debt, cut spending or raise taxes. The first does have the effect of reducing revenues and can therefore be co­un­ter­pro­duc­ti­ve.

 

Where doe all this leave the property sector in the North West?

We are a nation obsessed by home ownership and this will not change. Perversely, however, we do actively seek to buy when the market is high and less when the property prices are low. That aside, house builders are seeing higher activity levels and this is manifesting itself in increasing reservation levels. The Latest National House Building Council statistics show that the region is leading the way with new house building projects. Whilst this is positive news, the overall condition of the economy could still play a part in this recovery. We are still seeing increasing unemployment levels which, in turn, will lead to a reduction in consumer wealth, thereby reducing spending and ultimately going someway to holding back the upturn. In addition, there is still widespread concern that the banks are not lending in sufficient levels to builders and buyers.

 

The conclusion must be that whilst the indicators are showing that we are coming out of the recession, with a predicted return to growth, it will be a very slow gradual recovery. This will be particularly true in the property and construction sector which has been possibly the hardest hit.

 

Here at Greengates Builders Merchants, Lancashire we are hoping this conclusion is correct and we are slowly but surely recovering from the recession.