In our market, and indeed the wider economy, we talk about ‘consumer confidence’ a lot – not so much in a measured, research-based way, but as a more vague notion, a perception based on our own interactions with consumers and how they appear to be reacting to all manner of issues, statistics, research, life events, and how that informs the decisions they make.
Within the housing market at present, there appears to be a growing level of consumer confidence, borne out by the increased activity levels we are seeing, the greater level of demand to purchase in particular, mortgage approval data, perhaps even the number of ‘For Sale’ boards we see on the street, and how quickly they be converted to ‘Sold’.
There’s no doubting that this can all contribute to a more positive appraisal of how confident consumers are – we believe them to be more confident because we are engaging with those who are motivated to be active in our space. However, that does not necessarily mean that our wider appraisal is correct, and what might be happening across society in that sense might actually be quite different.
Take the research conducted every month by YouGov and the Centre for Economics and Business Research (CEBR) into consumer confidence, which admittedly took place before the recent positive news about potential Covid-19 vaccines came to light, and indeed before the US Election.
Now its latest iteration shows consumer confidence falling in October for the first time in six months. It covers eight metrics asking households their opinion on what might happen across these over the course of the next year. A score above 100 indicates consumers are more confident than not, and October’s general score of 101.3 is still good, however it was 1.1 points down on September.
Of particular interest to our sector, is how consumers view their household finances and their perception of the value of their home. Confidence in the former dropped 5.6 points over the month to 86, while for the latter there was a 3.9 point fall amongst consumers on whether the value of their house had been maintained, albeit this was still comfortably above 100 at 104.1.
And while confidence in the home retaining its value over the next 12 months was also seemingly strong at 108.8, this was a month-on-month decline of 2.3 points, and YouGov stated that this could be a sign that the housing market was running out of steam.
Now, for those of us active in the market at the moment, that might seem like a rather far-fetched appraisal – certainly from our perspective, we see no sign of the volume of our work trailing off. Indeed, at a time of year, when we might ordinarily see those volumes fall back, and when we would normally be able to work through any backlog before Christmas, there is no indicator that this will be a normal pre-Christmas holiday period.
In other words, our volumes were high in September, higher in October, and look likely to break those numbers again in November. Clearly, that’s good news for us now, it’s good news for advisers, lenders and all other housing market stakeholders, but there will come a point – especially without a stamp duty holiday extension – where that number will tail off because cases will not be able to be completed before the end of March next year.
The further issue of course with consumer confidence is that there are so many issues at play here. As mentioned, the news around a vaccine should provide a welcome boost to confidence, but what about the latest unemployment figures which show those claiming unemployment benefit are now up to 2.6m when they were approximately 1.2m when the March lockdown began?
Then we have Lockdown 2 in England and further localised measures – the gossip surrounding allowing families to gather over Christmas may be tempered by further, stricter lockdown measures needing to be followed over the next three months. How will this impact on jobs and ultimately on confidence to make large-scale decisions like purchasing a home over the course of 2021? Plus, as we draw closer to the end of March, and if there is no stamp duty extension, how might activity taper off? Will we get that much-dreaded cliff-edge?
So, consumer confidence while seemingly pretty strong now, might also be rather brittle if – as time moves on – these varied factors begin to fall more negatively and weigh more heavily on individuals and households as they seek to understand their future, take a position on what might happen, and use this to decide whether or not to engage with the housing market.
In that sense, we should not take this current period for granted. We need to make the most of the activity levels and ensure this level of work provides us with the strongest foundations for what may (or may not) lie ahead. It is impossible to second-guess consumer confidence or the future, but in the here and now, let’s do all we can to ensure as many clients as possible get to their end-goal within the desired timescale.
Simon Jackson is managing director at SDL Surveying