Consumer Confidence Matters
April 7th, 2009
In last week’s newsletter, I suggested that there were early signs of an encouraging level of activity at the lower end of the Spanish property market.
Not every one agreed with me. Newsletter subscriber, David Jesner commented: “You are encountering curiosity and assuming this equates with, and will translate into, sales. Even if the politicians meddle on an unthinkable scale, public confidence has been severely shaken and will take a long time to recover.”
A recent Moneycorp article about the sterling/euro exchange rate agrees with David’s notion about confidence being the main issue. It notes that Sterling’s recent revival against the Euro has more to do with a vague notion of ‘optimism’ about the outcome of the G20 talks, than any strict analysis of the underlying financial data.
In a post about the high level of visitor activity on US property portal Realtor.com, its chairman wonders what needs to happen to translate these ‘window-shoppers’ into actual purchasers:
“Two ingredients are needed for buyers to re-enter the market. One is their ability to pay. The other deals with confidence. Affordability and the ability to get financed isn’t the sole issue for some buyers on the sidelines. So what does it take to cause these visitors to act now?”
He goes on to say that buyer confidence is the overriding factor controlling the volume of house purchases today. Two of this week’s articles chip in on this same subject.
In How to Get Ahead on the Med, Nick Barnes, head of international residential research at Knight Frank comments: “People aren’t willing to dive into the stock market, they don’t trust banks and may want to do something with a lump sum for their pension, so they’re putting money into tangible assets such as housing.”
In Realistic Optimism in the Spanish Property Market, Simon Rubinsohn, chief economist at RICS comments: “Further evidence that the pick-up in buyer interest in the housing market is feeding through into actual activity is evident in the latest mortgage approvals data from the Bank of England. The number of mortgages sanctioned in February climbed to the best level since May 2008.”
In Spain, the dominant factor controlling consumer confidence is their ability to pay the rent. In Spanish Jobless Total Slows in March, we see a positive ‘spin’ on a devastating statistic.
However you dress the numbers up, a car accelerating at a slower rate than it did previously is still accelerating, rather than slowing down. So it is with Spanish unemployment – currently the highest in Europe, still growing, and tipped to exceed 20% of the workforce this year or next.
Faced with a statistic like this, it’s easy to see why there might be a lack of consumer confidence in Spain, why that might suppress property prices – and how that might be to the advantage of buyers from outside the country.
Martin Dell, Kyero.com
Related Posts
- UK Consumer Confidence fell to a four month low
- Global Property Market: Renewed Consumer Optimism
- Currency Exchange Matters
