Berry Blog

Markets of all types whether they are stock markets, gold, oil, livestock or real estate are primarily driven by one key factor. Supply and demand.

In the real estate market, it’s really simple - properties rise in value because there is a greater number of buyers than properties to purchase. This creates greater competition among purchasers which drives prices higher as people will offer higher and higher prices in order to secure a property.

Then likewise, the reverse can happen where there are more properties for sale than there are buyers and competition among sellers to find buyers will see certain sellers reduce their prices in order to attract the buyers to their properties.

The true essence of demand in all markets is consumer confidence. The more confident people are about any market, the more demand there is. In terms of the real estate market, that confidence is driven by five key factors: 1) The state of the economy, 2) Interest rates, 3) Population growth, 4) Unemployment, and 5) Housing affordability.

Over the past ten months, all those key factors have been in tracking along well, interest rates were at record lows, GDP was on the rise, population growth was solid, unemployment was stable, and housing affordability was comfortable thanks to falling interest rates.

So where are we now? We know the economy will take a substantial hit as a result of measures introduced to fight COVID-19, unemployment will rise and has already risen significantly, population growth is scheduled to remain constant, interest rates have fallen even further to new record lows, and housing affordability is even better for those employed. The reaction from COVID 19 has been the sharpest fall in consumer confidence since records have been kept.

It is the typical kneejerk reaction that occurs when a sudden shock hits the whole economy. What we will now see is a deeper examination of all those factors and for consumers to really assess how it affects them. The Government has put an all-time record stimulus package in place. Most leading economists accept that there will be an immediate recession but are forecasting a significant rebound in our economy as the stimulus takes effect.

Job losses will be very significant whilst ever we have the current restrictions and social isolation guidelines in place , but as soon as the coffee shops and restaurants, sporting events, the arts and everything else opens up again, we will be back to living life again and so there will be huge demands for employees for all those businesses. Likewise, there will be a rebound in consumer confidence as people feel relieved that the Coronavirus is no longer with us and that we can get back to normal life.

There is now a much talked about ‘recovery’, which is where, after the sharp falls we are experiencing now in all economic activity, there will be a strong rebound as soon as the restrictions are lifted as the economic stimulus measures click in.

No question that the real estate market has been reshaped for the present. But life goes on. Everyday there are those who must sell and those who must buy, and it is happening right now.

There is a lot yet unknown but keep an eye out for consumer confidence measures as they are going to give you a clear indication around how people are feeling about those five key factors.

Remember, every day of the week properties are exchanging hands between buyers and sellers and that will continue no matter what, but the speed at which that happens and the volume at which it happens will be guided by consumer confidence.

Stay safe, stay at home.