News In Focus
3 September 2010
Spending cuts and supply gluts see house prices tumble
A growing number of property industry commentators are warning that UK house prices may be set for another tumble over the next year, with some predicting a drop of 10% by the end of 2011.
On the back of a second consecutive month of declining values, as reported yesterday by Nationwide Building Society, market analyst IHS Global Insight is among those predicting the trend may wipe up to 5% off house prices in the second half of this year. It picks out increasing gloom over the expected impact of public sector spending cuts as a key factor.
Howard Archer, one of the firm’s chief economists, said that much would depend on mortgage availability and the number of houses coming on to the market, as well as how well the economy held up. "We suspect that house prices will be at least 10% lower by end-2011 compared to their mid-2010 levels,” he said.
Mortgage lender Nationwide echoed this concern over a glut of properties for sale, as owners waiting to sell sought to ride the apparent recovery in prices earlier this year.
“Recent market trends remain consistent with an unwinding of the supply-demand imbalance that drove up prices for much of the last year,” said chief economist Martin Gahbauer. “As more sellers have returned to the market, buyers have a greater selection of properties to choose from and more bargaining power with which to bid down asking prices”.
A recent report by the Fraser of Allander Institute predicts that public spending cuts will cost Scotland around 126,000 jobs over the next few years, spread over the private and public sectors. Even the Scottish Government-commissioned Independent Budget Review found Scotland would need to shed 10% of public sector jobs with four years.