Reasons to be cheerful - even after Brexit

At a meeting last week, the conversation turned to addressing the consequences of the recession - and I was amazed at how quickly the R word has crept back into the vocabulary. Are we in danger of talking ourselves into a downturn? I think so. 

As an agency, our main focus is construction which is the first industry to be showing negative effects of the vote. However, I would argue that housebuilding, which is the major area for most of our clients, has reasons to be very cheerful.The pipeline for new housing is stronger than ever. More planning permissions were granted in the last 12 months than at any point since the 2008 crash - according to the HBF / Glenigan's Housing Pipeline report published at the start of the month. 

We know underlying demand is strong. The "Building More Homes" report published by the House of Lords Economic Affairs Committee this month criticises the existing one million homes by 2020 government target as being too low and suggests that we need to double that number in order to meet demand. And reassuringly, in her first public comments, our new Prime Minister highlighted the need to address the housing deficit as an issue of immediate priority.

All these indicators put together pre the Brexit vote would have seen us basking in the prospect of a continued boom. So what has actually changed? There's a share price issue, of course - and the dramatic fall in the share price of the major housebuilders was front-page news in the immediate aftermath of the vote. Having 30% of your company's value wiped out overnight is clearly not a great start to anyone's weekend. 

However, look now and see that not only are the share prices starting to climb again but a quick review of the performance of the 10 major housebuilders over the last five years says that the share price of the majority are now back to where they were in March 2015. Not great, but surely not a catastrophe? 

Consider the major financial incentives still being offered to housebuyers and consider also that our banks are in a very different position now to where they were in 2008. There just doesn't seem to be any logical reason why the queue of prospective house buyers should evaporate. 

In my view the path from here is as much about the way we collectively behave as about how our negotiations with Europe proceed. People buy houses when they feel confident. And let's not forget that over 50% of our voting population believe we made the right choice in voting to leave and therefore probably don't share the media's gloomy view of the result and its consequences. What seems to be happening now is a collective holding of breath. That fatal "let's just hold off on that investment" attitude that so easily snowballs into a slowdown. So let's just not do that.

Let's focus on possibilities not risks, on sound demand v supply imperatives and let the government prove that it means what it says about housing. 

As a footnote, I would just observe that the only individual of my acquaintance to earn his living - and a rather good one - by independent share dealing, conducted on his own, from home, has a degree not in economics but psychology. He reckoned that was a far more useful qualification for predicting economic trends.

Posted by Anna Hern