The media and markets have seized on every crumb of good news released in past weeks, but the odd positive announcement – Barclay’s Q1 results were unexpectedly good – shouldn’t confuse our understanding of this recession. It will not right as quickly as it went wrong. March house prices showed a monthly decline of 1.6%, the redundancy axe is poised to swing again this year and unemployment is forecast to top three million by the end of 2009. The fiscal and monetary policy changes announced to date have so far failed to boost the mortgage market by any significant margin. Our latest white paper suggests the current outlook for the housing market isn’t good, despite the occasional ‘blip’ in the Halifax and Nationwide house price indices.
The UK’s housing market remains particularly exposed to the vagaries of the wider economy. Until the macro-economic fundamentals improve significantly, it is difficult to envisage anything but a continuation of the downward trend in houses prices throughout 2009. Each new prediction of the UK’s economic prospects appears to downgrade the last, the latest being the National Institute for Economic and Social Research which estimates the economy will shrink by a massive 4.3 per cent this year.
This comes hot on the heels of the IMF’s latest dour view of the UK’s chances – a contraction of 4.1 per cent in GDP. Both predictions eclipse the Chancellor’s now somewhat discredited budget forecasts. The UK government is under huge pressure to raise enormous quantities of debt over the coming years, at a time many other countries will be forced to do the same. It is likely that at least one economy will struggle to come up with the goods during this global debt raising – the markets are unlikely to forgive easily and the risk of a considerable devaluation of a currency and an IMF bail out is very real.
The UK should succeed, but containing the downside risk by prudent economic policy must now be the major economic policy aim. Prudent economic policy will leave little room for stimulus packages and hence the majority of firms within our industry and beyond will almost certainly find things get more difficult over the next 12 months. For those who are ready to evaluate the market properly and adapt their business model accordingly there may be opportunities to be had. Here at Exact, you won’t be surprised to know that we fully intend to take them.
