Job vacancy rate is up in the UK – a signal that recovery is in sight?

The UK has reported its highest job vacancy rate since the beginning of the pandemic. Between February - April there were 657,000 vacancies, up about 48,400 on the previous quarter. The unemployment rate also fell slightly to 4.8% in the three months to March, with the ONS suggesting these are early signs that the economy is recovering. This means that there will be tenants who are able to pay rent, and this allows for stable occupancy rates and good levels of rental income.

The tech industry is performing particularly strongly when it comes to job availability. 10% of jobs advertised are within the tech sector, which is the second highest after the healthcare sector. The industry performed strongly despite the pandemic, with 42% of tech companies surveyed reporting an increase in revenue in 2020 and 46% reporting a growth in employee numbers. The availability of tech jobs may encourage those out of work to hone their digital skills.

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The digital industry has been buoyed by the pandemic, as lockdown has caused many to rethink their shopping habits. Many people began shopping online as they were self-isolating or physical stores were closed. According to research that was conducted last year, online shopping rates grew by 129% week-on-week in the UK and Europe during the height of the pandemic. The increase also shaped what people expect from their online shopping experience and has prompted retailers to improve their user experience and convenience, which consequently has created more job opportunities.

Online giant Amazon has been one company to expand during the pandemic. This year, Amazon is due to create over 10,000 new permanent jobs that will bring its total UK workforce to over 55,000.

1,300 of these jobs will based in Doncaster where it will open a new parcel centre. The decision to invest in an area where there is job creation is a good strategy to follow as it means there will be a demand for accommodation. This is especially true in an area such as Doncaster where there is already a shortage of accommodation.

Developers are now recognising the need and have started to convert family houses into 5 en-suite bedroom HMOs for logistics workers. These HMO investments in Doncaster are available to individual investors who have the cash funds available. Prices start from £215,993 and produce a net income of 9.5% or more. The HMOs are also fully-managed and have been renovated beforehand, meaning that there is very little required from an investor in terms of renovation or upkeep.

UK economic growth and inflation

More good news is on the horizon for the UK as it is set to experience the strongest economic growth since WWII, according to forecasts from the Bank of England. GDP growth is expected to rise by 7.25% in 2021. The Bank of England previously forecasted a 5% GDP growth in 2021, but a faster than expected recovery from the Coronavirus pandemic coupled with an efficient rollout of vaccines has led to the Bank of England revising its prediction upwards. Although for now, interest rates will be kept at a record low of 0.1%, it is generally the case that when there is economic growth, inflation starts to creep in. To counterbalance inflation, higher interest rates are usually introduced to reduce the growth in aggregate demand. A rise in interest rates usually curbs consumer spending which reduces the supply of money in circulation and helps to reduce inflation as the value of the currency increases.

As interest rates increase, it means the cost of borrowing is more expensive (and during these times people tend to save more than spend). If the UK experiences sustained economic growth it is likely that the Bank of England will revise its interest rates. For those looking to borrow for a mortgage on a property, now is an ideal time to do it because interest rates are low and house price growth has been revised upwards.

Technology stocks and inflation

Technology stocks are growth stocks; and when interest rates are projected to increase, growth stocks can be negatively affected because there is an opportunity cost of missed interest for the uncertain prospect of growth. There has been a pullback in some of the prices of the big technology stocks. Apple Inc (AAPL.O) and Microsoft Corp (MSFT.O) stocks each fell more than 1%. Value-oriented stocks tend to fare better when there is concern over inflation and interest rates.

Working from home investment trends

During the pandemic people working from home had more time on their hands and more people started investing in Bitcoin and other Cryptocurrencies, which caused the value of Cryptocurrencies to rise dramatically throughout 2020. Stellar rose from 9k in July 2020 to 62k in April and has since pulled back to 33k at the time of writing this article on the 9th June 2021.

Bitcoin is supposed to be a store of wealth as it displays scarcity with only a maximum of 21 million Bitcoins ever to be mined. Mining activities are done by computers solving complex algorithms. This activity has recently come under scrutiny for its energy consumption and environmental impact. Even Bitcoin evangelist and adopters -like Elon Musk- have sold off their holdings resulting in the 46% decline since April’s highs.

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Bitcoin was conceptualised to replace Fiat currency (money). The basic functions of money are to act as a store of value, unit of account, and medium of exchange.

Bitcoin has not displayed its store of value (in recent months) and due to the complexity of the procession of the data on its blockchain it takes far too long to be a medium of exchange. This has created further doubts of its utility.

Property as a store of value

Although Bitcoin prices seem quite volatile now, house prices generally always tend to be on an upward trajectory. In real terms, UK house prices were 3.6 times higher in May 2019 compared to January 1970 and current circumstances are providing an ideal environment for further growth. House building has long lagged demand and coupled with a shortage of materials from EU imports, it is unlikely that enough houses will be built anytime soon to satisfy the need. The positive sentiment surrounding the UK property market is certainly shared by institutional investors as they increase their participation in the private rented sector (PRS). In 2015 only 1257 private rented sector properties were built and owned by institutions, that has risen to 4800 in 2020.

An example of an institutional investor funding projects in the UK property market includes PLATFORM_ which has joined forces with US investor Northwood Investors to form a new BTR JV (build to rent joint venture). The partnership is focussing on delivering new homes for rent in the cities of Cardiff, Glasgow, and Sheffield.

One Touch also believe that Sheffield is a great place to invest in the private rented sector. Sheffield's population is projected to increase by around 88,600 people over the 25-year period to 652,300 in 2039. To keep up with demand, Sheffield will need nearly 40,000 new homes by 2038. We have apartments starting from £114,000 in the Trendy Kelham area of Sheffield. The project is being undertaken by an experienced developer and only 20% deposit makes it accessible for investors to get started investing in UK property.

Find out why they could be attracted to by reading the fundamental of UK buy to let guide.

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To learn more about how UK property investments can outperform other asset classes, especially in the current climate where the economic outlook is more positive and the job vacancy rate is increasing, contact us today.