Rising property income boosts spending
This represents the highest increase in non-essential consumer spending for 15 years, although Verum warned that the Bank of England’s first base rate rise could shatter confidence unless there is significant wage growth to compensate.
Income from property has increased by 46% from Q1 2007 compared to salary increases of 22%.
Currently wages account for 63% of disposable income compared to 12% from property.
Robert Macnab, director of research at Verum, said: “There seems to be a growing perception among households that we have finally turned the corner economically. Higher employment and signs of rising incomes are supporting this sentiment.
“However, expectations of pay rises will need to be fulfilled soon otherwise the first interest rate rise could well shake this fragile returning confidence.
“Although household spending on essential living costs rose marginally in quarter three 2014, compared with falls in the previous two quarters, indications that real incomes are starting to rise, combined with falling unemployment, is mitigating the impact of marginal increases in essential living costs.”
The proportion of income being saved on average has fallen according to Verum, while levels of unsecured borrowing have increased steadily since quarter two 2011.
Verum said that rising interest rates and slower levels of house price growth will see households rein in their spending and instead put more of their income into savings unless real earnings growth increases.