No-one knows exactly how the recent spending review will affect Britain’s economy. Could cuts to benefits encourage thousands of people to seek work, boosting economic growth? Or will mass redundancies in the public sector lead to high unemployment and descent back into recession?
Whatever the eventual outcome, this lack of certainty is already having a significant impact on the property market with sellers unsure what price they can achieve for their properties.
Recent statistics highlight this: although Halifax reported a 3.6 per cent drop in house prices in September, property website Rightmove’s latest figures showed that stubborn sellers had raised their average asking prices by 3.1 per cent in October.
Rightmove’s Miles Shipside says: “Given the challenges of the current market, the behaviour of sellers in raising their average asking prices takes some explaining.”
When buyers and sellers can’t agree on fair prices, the housing market is likely to stagnate – and that appears to be exactly what is happening at the moment.
The Council of Mortgage Lenders recently said that mortgage lending in September had fallen to £12bn – the lowest September figure in a decade – while HM Revenue & Customs said that the number of completed sales had slumped 5.5 per cent to 85,000 in August.
Where the cuts will hit hardest
It certainly seems to be a buyers’ market at present, even if some sellers don’t realise it yet, but a report from property websiteZoopla suggests that certain parts of the country are likely to see much sharper price falls than others.
With the government’s own estimates suggesting that spending cuts will lead to around half-a-million job losses in the public sector, Zoopla has complied a list of areas where state-sector employment is highest.
The assumption is that increasing joblessness in these parts of the UK will depress property prices faster and further than the national average.
Areas with particularly high proportions of public-sector workers include the likes of Oxford, Denbighshire, Cambridge and Middlesbrough, all of which have at least 40 per cent of their residents employed by the national or local government.
On the other hand, areas where state workers make up a smaller proportion of the workforce include the City of London (where just 4 per cent of workers are in the public sector), Crawley in West Sussex (12 per cent), Corby in Northants (13 per cent) and North Warwickshire (14 per cent).
An opportunity for buyers…
So once the cuts are actually implemented, it is possible that areas with high levels of public-sector workers will provide bargains for buyers if rising unemployment – and a consequent increase in the number of families who can no longer afford their mortgages – leads to falling prices.
There are a couple of things to bear in mind, however.
Firstly, to some people it may seem unethical to “target” areas which are suffering most from the cuts in this way. But the fact is, if a home-owner needs to sell their property, they are unlikely to be particularly bothered about a potential buyer’s motives.
Secondly, buyers should bear in mind that, although they may be getting a bargain by purchasing in a depressed area, they are likely eventually to want to sell up themselves – so it’s worth considering what the property market will be like there in a few years’ time.
…and a warning for sellers
The Zoopla research should give owners in the at-risk areas an incentive to market their properties sooner rather than later.
The effect of the cuts is unlikely to have an impact on prices immediately, but if you live in a part of the country where impending public-sector job losses could have a significant effect, you may be better off selling at today’s rates – especially if you are planning to move to an area where house values could be more resilient.
One final point to think about, however, is that there are many other factors that could affect house prices over the coming months, so beware of basing your entire buying or selling strategy on a single report or trend.
