By Fred Bristol, CEO
They say “there’s nothing new under the sun” – and that’s a phrase I’ve been thinking about a lot, 12 months into the coronavirus pandemic.
Similarly, I’ve been thinking that the common claim that we are living in “unprecedented times” is not really true – and there’s real hope in that knowledge.
Humankind has suffered from many global plagues in recent history – from smallpox in the 1500s, to the Great Plagues of the 17th and 18th century and the Spanish Flu of the 20th.
And we have survived, recovered, and thrived after each one.
The lessons from the Spanish Flu, in particular, are interesting because of the stark similarities with our own pandemic. It necessitated social distancing and mask-wearing. It came in waves, springing up in different countries, at varying levels of severity, and at different times. And it was raging across the globe at the beginning of the Twenties.
Sounds familiar, doesn’t it?
That’s because there are lots of similarities between then and now and – here’s where the hope comes in – lots of reasons to believe the coronavirus pandemic will echo the Spanish Flu in another key way: it will precede an economic boom.
In other words, when we roll-out mass vaccination and defeat the virus, we might do more than simply recover or “get back on our feet”. We might see the dawn of a new age of industry and prosperity, a Second Roaring Twenties.
Are the conditions that preceded the Roaring Twenties present today?
The Spanish Flu ran its course by 1920 and, three years later, the United States and Europe enjoyed economic booms, now known as the Roaring Twenties, which lasted until the Great Depression, a global downturn that followed the famous stock market crash of 1929.
The economic renaissance was largely driven by pent-up capital, as well as technological and scientific advances. But it was also that very human desire to live “life to the full” that ushered in a period of growth and prosperity.
Survivors of the Great War and, then a pandemic, understandably wanted to party like never before. Years of social distancing was followed by a yearning for social interaction. Abstemiousness, risk-averseness and money-hoarding, gave way to indulgence, spending and reverie.
We cannot know whether history will repeat itself (although the New Year celebrations in Wuhan, if taken at face value, certainly suggest many of us could be harbouring a suppressed desire to enjoy ourselves) but we are certainly doing the hard bit, just as they did 100 years ago.
Households have built up an average of £7,100 in savings as lockdowns curtailed spending in 2020, taking Britain’s collective nest egg to £197 billion, according to a report from the Centre for Business and Economic Research last month. We were denied the chance of spending those funds over the Christmas period and the stifled demand could well fuel a spending spree when we finally beat Covid.
What might this mean for property?
It’s important to reiterate that the post pandemic boom of the first Roaring Twenties took a while to get going and even if a recovery is quicker this time it’s a braver man than me who will predict what will happen to property prices later this year, let alone the years beyond.
However, it’s worth remembering that demand for housing is dependent upon income. With higher economic growth and rising incomes, people are able to spend more on houses, increasing demand and pushing up prices.
It’s also worth remembering that there are underlying drivers that haven’t changed and won’t change because of the pandemic. London and the South East have a structural housing shortage. Nationally, around 240,000 new homes are required each year but only 174,000 were built in 2018/19, according to the Government’s own figures. And the population continues to increase.
The fact is no-one can be sure what the near or long term effects of this pandemic will be – but what we do know is that the situation we’re in is not new. And history tells us that humans are hard to keep down. We are economically-active, resilient and resourceful creatures – and that’s a reason to be cheerful.
This article contains Brickowner’s opinions, based on the information that is available. Always seek the advice of a qualified independent financial adviser if you need advice. All investors should be aware that their capital will be at risk. The value of investments can go down as well as up. Forecasts are not a reliable indicator of future performance. Brickowner investments are not covered by the Financial Services Compensation Scheme. There is no recognised market to sell Brickowner investments. Brickowner investments are illiquid.