© Jagadish C Wagle
According to Office for National Statistics (ONS) the UK’s Gross Domestic Product (GDP) rose by 1.9 per cent in 2013. IMF has already forecasted that the British economy would grow 2.4% by 2014, faster than any other major EU economies. The treasury said the new British forecast was evidence that the government’s economic plan was working. In the meantime Chancellor George Osborne declared that due to the GDP growth Britain can afford a higher minimum wage 7 pound per hour although to match inflationary gap and living wage unions have asked to increase more as it is set at £8.80 in London and £7.65 for the rest of the country . If the GDP recovery is sustainable it is definitely a good news for the Britons.
But regarding the sustainability Vince Cable, Business Secretary, seems suspected and he said ‘‘economy could crash soon’’. He claimed ‘‘Britain’s economic recovery is the ‘wrong kind’ because it is based on a housing boom’’ while he was speaking to the Royal Economic Society. (Metro 28 Jan 2014)
Similarly Labour Party and the unions warn the recovery is led by the ‘house prices’ and growing ‘consumer debt’ and could be ‘unsustainable’. (Metro 29 Jan 2014)
A news published in Metro (30 Jan 2014) has revealed the fact that ‘‘House price in some part of Britain soared by 17 per cent last year.’’
But the number of properties on the market for sells is the lowest for six years according to the National Association of Estate Agents (NAEA). (Metro 21 Jan 2014)
Figures from the NAEA show a 14.4 per cent increase in the number of house hunters registering during December. The decline in properties is 7.9 per cent. Hence there is huge gap between demand and supply of housing in the UK.
Several indications have proved that housing business has boosted the GDP recovery for the year 2013. The government is intending to invest more in housing as the ‘first-time buyer’ program has already been set up. Even private sector has also been encouraged to increase their investment in housing to fulfill high demand. Hence housing and real estate market could be a major component to lead the GDP growth for next couple of years too.
Seven out of ten regions saw rents fall on a monthly basis between November and December, which was in line with a monthly fall across England and Wales as a whole. The sharpest monthly drop was found in the South East, with rents down 2.0 per cent since November. This was followed by a fall of 1.9 per cent in both London and Wales.
Director of LSL Property Services David Newnes says: ‘Very gradually, the clouds are clearing for tenants. Households have suffered from the most painful recession in living memory, but it’s clear we’re now coming out the other side.’
The problem is how to increase the purchasing power of consumers so that they can buy houses. Prices have risen faster than incomes. Otherwise investing more money from private and government sector would be ‘‘pouring water into sand’’ if consumers cannot afford it. For that either price or rent of housing need to go down or consumers income need to go up. Both are not easy.
Let’s see in the future who is right Chancellor Mr George Osborne or Business Secretary Mr Vince Cable as they both are cabinet member of present government of the UK.