2021 - Well, that was different...
2021 was not what any of us expected, I’m sure. From COVID19 lockdowns, to trade shortages, construction cost rises, tightening investment yields and rising houses prices….one thing is for sure, the year wasn’t boring.
So, what did we learn?
At the start of 2021 I looked towards an uncertain year of further COVID lockdowns and subdued markets, however the best example of human personality has come to the fore this year, and that is the ability to allow familiarity to breed contempt.
COVID has become part of our lives and as we have reached the 80% and 90% vaccination marks the politicians calls for lockdowns are starting to be seen more as political scaremongering rather than a genuine concern for the public’s health. Don’t get me wrong I am not dismissing COVID, and I am pro-vaccination, but at some point, we need to start to live and trade again. It is easy for politicians and bureaucrats on government wages to enforce lockdowns when they are not the ones whose livelihoods are at risk.
A surprising and critical aspect that has come to the fore though is that the last 12 months of lockdowns has seen both personal and corporate savings and equity positions improve. Of course, they have improved through a lack of spending which has devasted retail businesses. However, that has led to two things-
Increased spending and investment ability which has boosted property markets
A willingness to chase and invest in blue chip assets at historically low yields
When you combine these two elements with COVID’s impact on the supply of steel and other building products, due to reduced shipping capacity around the world, then we are seeing increased costs and increased property demand. It is of course also starting to drive inflationary fears.
That’s all great (even the inflation is not that bad) but let’s not lose site of the fundamentals of economics. What goes up must come down. What is historically low now (interest rates and yields) can only go up. Economic growth is good and at the moment this mini boom is coming off the back of an exceptionally low base, so the lesson is to be diligent in your property development and investment decisions in 2022. Clearly understand your investment strategies and stick to them, don’t speculate. Do your due diligence, don’t guess. If you stick to the core principles, then there is significant opportunity in 2022. If you don’t and you want to speculate then you may win big…or you may lose big.
Whichever way you go I hope you all have a wonderful Christmas and that 2022 is a momentous year for you all.
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