Twindig Housing Market Index 21 May 22
In the week that UK inflation hit a 40 year high, the Twindig Housing Market Index rose by 1.8% to 74.7.
After three weeks of declining investor confidence in the housing market, we were a little surprised that the record high for inflation did not further knock that confidence.
Few are immune to the impact of inflation in our economy, and I certainly got a fright when I filled my car with fuel this week, and spending patterns will change as prices rise.
This could mean that we end up spending more time in our homes and if that is the case, the same factors that drove the housing market during lockdown may once again come into play. Spending more time within the same four walls may increase the desire for a bigger home and going out less may increase the attractions of a bigger garden.
However, rather than a 'race for space', we may see a 'race for savings', as households look for homes that are cheaper to run and occupy as household bills rise. The strong and positive trading update from housebuilder Vistry Group (Bovis and Linden homes) could well point to the fact that energy efficiency and connectivity are of rising importance to households, hinting that the 'race for savings has already started. With fewer than two in five homes having an EPC rating of C or better, the demand for energy-efficient new homes appears not only to be robust, but also rising.
Interest rates are likely to rise again as inflation remains so high above the Bank of England's 2% target, but whilst their aims are admirable, one has to question how effective the use of national ammunition (interest rates) can be against the global drivers of inflation.
Perhaps it is a time to take the advice of Reinhold Niebuhr, who said:
God, grant me the serenity to accept the things I cannot change,
courage to change the things I can, and wisdom to know the difference