One area where wage growth most certainly isn’t stagnating is in the building trade, such is the lack of skilled labour needed to actually deliver the new homes required to keep the profits rolling in – and special dividends rolling out to investors. To my mind it is a concern just as pressing as the direction of interest rates, and one which I’m currently experiencing first hand, finding it all but impossible to track down a reliable builder to take on my loft conversion. So ridiculous have the quotes been so far that I will simply wait until the inevitable cyclical construction downturn arrives, even if it takes years.
That delay seems a distinct possibility, much to my children’s chagrin – their new bedrooms trapped on paper for the foreseeable future. But I am sure that the economics of home construction will catch up with the housebuilders at some point – despite their efforts to establish apprentice programmes to make sure they have enough bricklayers, plasterers, plumbers, electricians, architects, surveyors and so on, it seems unlikely that these will deliver anywhere near enough labour to meet demand on the current scale.
And while selling prices are currently rising faster than cost inflation - not just of labour but of materials like bricks too – any price deceleration could squeeze the sector’s margins in the years ahead. Some have suggested that it is housebuilders themselves who are limiting supply to artificially boost prices and maintain this fragile equilibrium. Given the emotionally-charged politics behind the UK’s housing market, that could come back to haunt them in the years ahead if politicians decide they are making too much money – a potential instance of too much demand not being a good thing.
Excess demand is not, sadly, something that miners can boast at the moment, and this week’s surprise devaluation of China’s yuan – or renminbi – has done little to calm nerves surrounding the world’s biggest devourer of commodities, prompting a significant sell-off on global equity markets. While it seems somewhat hysterical to talk of currency wars, China's move is one reason to think that global growth could be slowing more sharply than previously thought. At least, from the housebuilders' perspective, that's another factor to keep interest rate rises at bay for a while yet - but in a broader sense it is much more worrying.
