The Berkeley Group – Effects of the Macroeconomic Environment on Managerial Decisions

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“The biggest risk…is that Brexit reinforces structural problems in the housing market. If fewer people buy and sell properties, greater numbers of rich pensioners will end up staying in houses too big for them…in effect reducing the supply of housing for others. And if European workers are put off or prevented from coming to Britain, the country’s building capacity will shrink, making it even harder for the government to hit its target of building 250,000 homes a year.” (The Economist Newspaper Limited)

Also, being reliant on forward sales, and therefore requiring overseas and institutional investors, increases our exposure to global macroeconomic events. For instance, foreign direct investment in UK properties can be affected by events such as:

- movement in foreign currency exchange rates[12]

- easing of commodities prices and commodity economies

- slowing of growth in emerging markets

- changes in foreign government policy regarding overseas ownership

Lastly, global ‘mega-trends’ will have an impact on our business. Apart from the trend away from home ownership mentioned above, the ageing population will change the type of accommodation we need to produce to meet changing demands of our consumers. In the next decade we can expect our core customers to be millennials, with virtually all of them digital natives. With a move away from traditional working and labour requirements, we can expect to see dramatic shifts in requirements from housing as more people decentralise their working, become virtual employees or micro-entrepreneurs.

Conclusion

In summary, the Group can expect local and global macroeconomic activity and mega-trends to heavily impact both the mesoeconomic environment of volume housebuilders and also the microeconomic environment of our purchasers. Long term increases in housing unaffordability can be expected to increase governmental oversight and policy implementation that can have significant impacts on the business.

Further, as buy-to-let ownership reduces and long-term renting increases, changing trends in home ownership and dwelling usage will have a profound effect on the type of product we offer, and also the manner in which we finance our projects.

Lastly, as housing moves more towards ‘product’ rather than ‘necessity’ greater levels of price elasticity can be expected as convergence in the mass-housing market occurs, even in the London market that has traditionally provided greater margins than the rest of the UK market.

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Bibliography

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Spaulding, William C. "Supply-Demand Market Equilibrium." 2016. thisMatter.com. 7 December 2016. .

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