Spring bolsters house sales and high street
April’s sunny weather gave a boost to both the housing market and the high street, two areas particularly hard hit by the economic downturn.
The latest survey from the Royal Institute of Chartered Surveyors (RICS) shows that house sales increased during April with the largest increase in new buyer enquiries for almost a decade. Around 41% more chartered surveyors reported a rise than a fall in buyer enquiries during the month, up from 32% in March.
This optimism was particularly prevalent in London, where 70% more surveyors said buyer interest had improved.
Jeremy Leaf, spokesman for RICS, says this is the first time that surveyors have been universally optimistic about sales since August 2006. However, the increase in new buyer enquiries comes from historically low levels, and actual sales remain worryingly low.
"There are tentative signs that the market is starting to pick up but transactions remain at very low levels and we are unlikely to see significant improvement while money remains in short supply and the employment picture is uncertain,” says Leaf.
Meanwhile, the high street saw sales rise 6.3% during April from the same time last year, the best sales growth for three years. However, the fact that Easter fell in April this year but March the last, plus 2008’s wet spring, make comparisons tricky, says Stephen Robertson, director general of the British Retail Consortium.
“Sales of garden goods, outdoor leisure, clothing and food did well but other non-food sectors missed out on the seasonal boost and the total spent on food rose less than food inflation, indicating the amount sold dropped,” he adds.
Both the housing market and the retail sector appear to be caught in a Catch-22 situation. While there is an argument that there is “pent-up demand” from consumers, many of who have drastically reduced their spending or have delayed buying a property, job insecurity is still holding them back.
“It would be dangerous to see the retail figures as a sure sign that consumer confidence has returned just yet,” says Helen Dickinson, head of retail at KPMG. “What they do show is that consumers are remaining resilient to the prospects presented by a gloomy economic outlook and, for the moment at least, are not making a step change in reducing their spending."
Within the housing market, a lack of consumer confidence combined with restricted lending by banks continue to present the biggest barriers to homeownership.
Ben Thompson, director of mortgages at Legal & General, says the buyer interest will not translate into sales until house price falls have stabilised.
"Consumers still think that prices will fall over the next six months and as long as this remains and the labour market remains weak, house prices are not going to pick up significantly,” he explains.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).