Agency backer slams ‘outdated housing market metrics’

Toscafund Asset Management chief economist Savvas Savouri has slammed the use of ‘outdated metrics’ when measuring the housing market.

The investment firm has backed agency brands such as Strike as well as The Guild of Property Property Professionals’ parent company.

Speaking to The Guild's chief executive Iain McKenzie on the property network’s latest podcast, Savouri said that sectors such as the housing market are still viewed with the same metrics as they were in the 80s, however, much has changed since then.

He said:  “The narrative was that last year we were going through a housing, labour and banking crisis, however, in my opinion, nothing could be further from the truth. The housing market was incredibly robust. 

“There was 14 years of zero interest rates, which means that if someone was mortgaged, they were paying down their principal, but this was denying banks income. 

“When base rates are close to zero, the economy is essentially on life support. 

“At the moment there is an exaggerated narrative that interest rates are raising at a frenzied rate, however, in reality for the UK economy to be functioning healthily, rates need to be between 3.5% and 4.5%.”

He suggested rates could possibly go to 4.75%, which he said is “nothing to fret about.”

Savouri notes that despite the fixation of the media with the increasing interest rate, there is not an immediate transfer between the base rate and mortgage rates, pointing out that 10m privately owned homes do not have mortgages, adding: “The base rate should have started to be raised in 2013, however, it wasn’t because the Bank of England Governor at the time was inept. The journey to 4.5% should have started then, so that it could have been a gentle incline rather than the far steeper incline we are currently experiencing.”

During the podcast, Savouri goes on to discuss and debunk several other economic metrics that don’t reflect what is really happening in the economy, such as the way GDP is measured. 

He said: “Consumer behaviour has changed; however, this hasn’t been considered in the metrics. For example, GDP looks at aspects such as food purchased from grocery stores, but not food that is delivered to homes from restaurants. 

“It also looks at the petrol we put into our cars, which shows a decline because people are driving fewer petrol-driven cars, as they are getting things delivered. So, whenever you see GDP, add 0.2 to it, because there is an unnatural bias.”

McKenzie and Savouri also discussed the probability of a recession and why the property market will continue to move from strength to strength.

> To hear the conversation in full, visit: The Home Stretch podcast.