Sometimes it can be difficult to see how the stock markets impact upon us. As news streams in of a bad day in the City of London, terrible news from Wall Street or slumps in the CAC and DAX, it is easy to switch off as life appears to be going on as normal.
But in a global capitalist society what happens in the markets can impact a number of areas of life, both economic and civic. As January draws to a close, it is fair to say 2016 has been an awful year for the global markets so far. But why? And what does that mean for student property markets?
Trading screens in China continue to turn red and the price of oil is incredibly low. Those two are arguably the most significant factors causing worry and occasionally chaos in the global markets. That isn’t the whole picture though. American interest rates rising have caused problems in the currency markets. The Eurozone is still weak and possibly flawed, with radical and anti-EU political parties on the rise across the continent adding to the uncertainty. Then there are weaknesses in a number of developing economies, including Russia, South Africa and Brazil.
All in all it paints a pretty bleak picture, and as the FTSE and other stock indexes fell into bear market territory some analysts were warning that there would be a serious global crash and recession in 2016. RBS issued a letter to investors advising them to sell everything (just about). The Davos gathering of business and political elites was littered with pessimism and dire warnings. The reason for such pessimism is that with all the factors that could cause a recession mentioned above, most central banks don’t have the tools left to try and deal with such a scenario. Interest rates in most Western countries are low, and huge Quantitative Easing programmes have already taken place. Too much QE can undermine the structure and value of an economy.
So, what impact would any of this have on the student property market?
In recent economic downturns and recessions student property has proved to be recession proof, continuing to grow as a market and continuing to provide high yields to investors and landlords alike. There’s no indication that wouldn’t be the case again, unless the housing market completely collapsed, which could lead to a realignment of rent prices. In that scenario the global economy is in real trouble! However a small decrease in house prices could be good news for student landlords, allowing the opportunity to increase their portfolio at lower than usual prices. That isn’t a risk free scenario though.
This sounds like a recession would be good news for student property, but that isn’t the case. Though it may be an attractive safe haven for investors in a storm, the surrounding economy slowing down can be bad news. A slowdown in construction and manufacturing for example will have knock on effects for developers and planners.
Then there are the austerity measures that have followed economic downturns over the last decade. Further cuts to public services, student grants and potentially further amendments to university funding could all impact student numbers in the future. There is no guarantee that student numbers, from at home or abroad can stand up against wave after wave of cuts and fee hikes.
It is a worrying time for everyone. The markets matter and keeping an eye on global trends and their possible impacts domestically is sound advice for landlords, developers and planners. It can lead to opportunities, but it can also help to defend against economic damage during a downturn.