Recession
Britain's property market has boosted the nation’s wealth to £6.8 trillion despite a global financial crisis, with the property market accounting for £4 trillion – that’s 58.8% of the value of the UK economy.
What is a Recession?
The term recession is a term used in economics, which describes a cycle in which the economy is contracting, causing a downturn. Key indicators are used to assess a recession, such as;
- The drop in GDP [gross domestic product – this is the amount of goods exported out of the country]
- A higher rate of unemployment – more redundancies and less opportunities
- Lower investment spending both commercial and consumer back in to the economy
- A higher rate of bankruptcies
- Lower household incomes
- Business profits being shrunk if not depleted
- Inflation spiraling out of control
The current recession has taken place in main as there has been a widespread drop in spending, triggered by a financial banking crisis, an inflated unsustainable economic bubble, a highly inflated housing market, a supply shock together with an external trade shock, all of which have had a detrimental effect on the wider economy.
What sets this recession apart, is the magnitude of its impact is not just confined to the UK, but is widespread across the world. Banks borrow to each other, and as trade is becoming increasingly globalized, the impact in one country as seen by this recession, can trigger throughout all the others, causing global crisis.
Can a Recession last forever?
Since the beginning of financial records being recorded, irrespective of any economy, no recession has ever lasted forever. Given the value of the UK economy at £6.8 trillion, and the property market being a huge component of this with a value of £4 trillion it is highly unlikely to last forever. With foreign investment, cuts in spending, quantitative easing, a focus and drive towards employment and pushing the economy forward, austerity measures in place – are all part and parcel of rebalancing the economic position of the UK in order to help drive the economy back in to growth.
As most major countries have bilateral agreements and vested interests in each other’s economies, whether that be through trade or investment, the focus of the Eurozone and the United States is to ensure that such recovery is a quick one.
Like all recessions and even the last depression in the 1930’s, economies do recover and over a period of time do grow.
What does a Recession teach us?
There are many lessons to be learnt after a recession, and although we may dwell on the causes and the effects of such events, and look to establish how we can take different investment decisions which may assist from preventing or militating against another recession. However, if we look back we can see that too much time should not be dwelled upon this as the next recession could be another decade or two away, anmd therefore does not necessarily pose an imminent risk.
There are others who see the recession as an opportunity, and as such look at ways in capitalizing on property and using the downturn in the economy as a competitive advantage, resonate in the belief that over a period of time their investment acquisitions made today will provide them with high equity returns in the future and in the interim benefit from the income that is generated from their purchased new assets.
Why is the UK a Great place to Invest?
- The UK has the Sixth Largest national economy in the world measured by nominal GDP
- Eighth largest economy measured by purchasing power parity (PPP),
- Third largest in Europe measured by nominal GDP
- Second largest economy in Europe measured by PPP.
- The UK has one of the world's most globalized economies.
- London is the world's largest financial center alongside New York and the largest financial center in Europe.
- Construction is the fastest growing sector of the economy since the 2010 Recession in the UK.
- Britain's property market has boosted the nation’s wealth to £6.8 trillion.
- Net worth rose 3.3% in 2011 according to figures from the Office for National Statistics, with property now worth more than £4 trillion.
- “Dwellings are the most valuable asset in the UK. They have steadily increased in value in recent years, except for a fall in 2008, and are now worth over three times as much as 20 years ago,” as mentioned by the Office for National Statistics.
- The UK Population is rising
- There is a shortage of approximate 240,000 homes per year – this is set to increase
- Large foreign Investment in the UK as it is seen to be a safe economy against other world economies.
- Rental demand is high as lending is restrictive for first time buyers.
