Government spending cuts puts UK house sales on hold
29 July 2010
The number of house sales in the UK has been hit by the prospect of the Government's spending cuts. The latest Agency Express Property Activity Index shows that monthly house sales in July dropped by 2.9% compared to June. This is the second consecutive month that house sales have fallen. It appears that the Government's announcement that there will be a two-year public sector pay freeze and an increase in VAT early next year have contributed to potential homebuyers revising their budgets and putting their moving plans on hold, albeit temporarily.
The number of houses 'Sold' in July was the lowest level since January and compared to July 2009, monthly house sales were down 3.9%. However, they were up 26.0% on July 2008.
It's a similar story when you look at the data relating to the number of houses being put up 'For Sale'. July saw a 7.3% decrease – the first time this year that monthly sales instructions have dropped. However, the number of new 'For Sale' listings was up 62.6% on July 2009 and 5.4% up on July 2008.
Stephen Watson, Managing Director, Agency Express, said:
“It is evident that we are entering a period of austerity as the Government looks to cut back on its spending. Anyone working in the public sector will see a drop in their real income as they won't get a pay rise until 2012, at the earliest. In addition, the rise in VAT next year and the pressure on some companies for it to reduce the hours for its workers will hit people's household budgets.
"It seems that people who have been looking to move have paused to take stock of the situation and to recalculate their budgets. However, with the likelihood of interest rates staying low for sometime and the number of properties coming to market still looking healthy, it should mean house prices and affordability will remain stable, so it's still a good time to move.”
Only four regions in the UK saw an uplift in the number of houses 'Sold' in July. The West Midlands had the biggest increase up 17.4%, followed by the South West up 11.4%, Scotland up 3.4% and London up 0.8%.
Unsurprisingly, cities in the South West, Scotland and Midlands had the largest increases. Exeter led the way with a massive 91.1% hike, with Southampton seeing a 53.9% rise, Glasgow up 32.5%, Coventry up 25.8% and Birmingham up 21.3%.
When it came to properties being put up 'For Sale', only two regions – Scotland up 4.3% and the East Midlands up 3.7% - saw growth. The worst hit regions were Wales down 18.2%, Central England down 15.6% and the North East down 11.0%.
There were six cities that saw an increase in the number of properties put on the market in July. They were Exeter up 18.2%, Nottingham up 17.3%, Milton Keynes up 13.7%, Edinburgh up 11.8%, Southampton up 8.3% and Glasgow up 0.3%.
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