Unemployment – the Secret Driver of the Stourbridge Property Market?

If you have been reading my articles on the Stourbridge property market recently, you will see that in the three years since the Brexit referendum, we have proved beyond doubt that Brexit has had very little effect on the Stourbridge property market (or the UK as a whole).

So one might ask, what does affect the property market locally? Well many things on the demand side include wages, job security, interest rates, availability of mortgages, confidence in the economy, inflation, speculative demand … the list goes on. Yet as my blog readers will note, I like to delve deeper into the numbers and I have found an interesting correlation between unemployment and the number of properties sold (i.e. transactions).

Why transaction levels and not house prices? Well just looking at Stourbridge house prices as a bellwether has flaws. Many property market commentators and economists believe transaction numbers (the number of properties sold) give a more accurate and candid indicator of the health of the property market than just house values alone. The reason is twofold. First most people when they sell also buy, so if property values have dropped by 10% or risen by 10% on the one you are selling, it would have done the same on the one you are buying – meaning to judge the health of a property market is very one dimensional. Secondly, the act of moving is very much a human thing. Property habitually conveys a robust emotional connection with homeowners – a connection that few would attribute to their other investments like their savings or stock market investments. Moving home could be described as a human enterprise, moving from one chapter of one’s life to another. When people move home, it shows they are moving forward in their lives and so this gives a great indicator of the health of the property market.

Looking at Dudley’s figures on the graph, you can see an inverse relationship between unemployment and housing transaction levels.

Property transactions in Stourbridge dropped by 51.46%, whilst unemployment in Stourbridge rose by 59.11% during the 2007 to 2009 Global Financial Crash

There is clearly a relationship between conditions in the Stourbridge job market and the number of people who move home … interesting don’t you think?

Year Unemployment % Rate in Stourbridge and Dudley Number of Properties Sold in Stourbridge

and Dudley

2004 5.1 5261
2005 4.5 4499
2006 5.5 5796
2007 6.2 5534
2008 8.3 2959
2009 9.8 2686
2010 10.5 2957
2011 9.6 3044
2012 8.6 2905
2013 8.7 3467
2014 6.9 4150
2015 6.8 4375
2016 6.2 4135
2017 5.8 4356
2018 5.4 4408

 

Now I am not saying unemployment is the only factor influencing the Stourbridge property – but it has to be said there is a link.

As a country (and indeed here in Stourbridge) over the last 40 years, we have seen a shift in the outlook over the purpose of housing and the development of the religion of following house prices (and I appreciate the irony of me writing these articles on Stourbridge – feeding that habit!) Yet, when did owning a home turn from buying a roof over your head to an out and out investment vehicle? I do wish people would stop fretting about their intrinsic value being associated with their Stourbridge home. Now of course, I am not dismissing the current levels of Stourbridge house prices – we just have to take into consideration other metrics alongside them when judging the health of the property market locally.

One final thought, looking on a broader scale in the UK, those towns and cities whose property markets bounced back after the Global Financial Crash had high levels of employment and low unemployment whilst places with high unemployment and relatively low employment have, on the other hand, typically under-performed.

So the next time you are considering a house move or buying a buy to let property in Stourbridge … don’t make your judgement on house price growth alone.

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