Consumers shift to renting
20 July 2015
- UK increasingly a “nation of renters”
- Consumer confidence fell during the first quarter of 2015
- But cheaper essentials allowing consumers to spend more on luxuries
Fewer consumers are paying off a mortgage than at any time since Q3 2011, according to the latest Consumer Tracker from Deloitte, the business advisory firm. The quarterly survey of 3,000 UK consumers also revealed that a greater proportion of consumers were paying rent in the first quarter of 2015. This shift within consumer spending from paying for a mortgage to paying rent is being driven by the decline in homeownership, now at its lowest level in three decades.
Consumers living in London and the South East are now showing lower levels of confidence than any other UK region, with the capital seeing the steepest decline in overall confidence, down by six points from the previous quarter. By contrast, confidence in the North rose for the second consecutive quarter, and is now nine points higher than when the survey began nearly four years ago.
Ian Stewart, chief economist at Deloitte, said: “Analysis of the media during our fieldwork period shows that stories on the slowdown in the London property market and concerns over the affordability of housing in the capital featured prominently, and this may have also weighed on Londoners’ consumer confidence.
“A deep and protracted recession seems to have left its mark, with a period of sustained ‘good news’ needed to shift cautious consumers fully out of their defensive mode.”
Overall consumer confidence fell by one point in the second quarter of 2015, driven in part by falling sentiment on disposable income, its first decline in 18 months. However, the long-term trend remains promising, with year-on-year confidence in disposable income three points higher. The recent fall in consumer confidence suggests that UK consumers have yet to see the full benefit of the recent rise in earnings.
Ben Perkins, head of consumer business research, added: “We have reached a tipping point in consumer confidence. The second quarter of 2015 revealed that the number of consumers displaying defensive behaviour fell while there was an increase in those showing a more expansionary mode.
“Furthermore, it appears consumers are likely to capitalise on a period of low inflation and rising earnings, by planning to increase their spending on discretionary categories in the third quarter of 2015. This suggests positive momentum in the consumer market.
“We have seen a second quarter-on-quarter increase in the proportion of consumers buying more expensive items. This is further evidence that we are finally approaching a point where the strength of the UK economy finally translates into a comparable increase in consumer confidence.”
Notes to editors
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.
Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.
The information contained in this press release is correct at the time of going to press.
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