What impact will the Spending Cuts have on Buying and Selling in 2011?

publication date: Oct 25, 2010
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

What impact will the Spending Cuts have on Buying and Selling in 2011? 

Well we all waited and waited for the 20th October to come and now it’s happened, I’m not so sure we are much further forward in working out the impact on the property market next year now we know the spending cuts!

With property, the key effects, whether you want to do a self build, rent for the first time, or trade down for the last time, are down to confidence in the market and supply and demand.

If you are buying and/or selling property or land, then you are mostly affected by confidence in the market and the number of people looking to sell or buy property. An ‘influencing’ factor would be the supply of mortgage finance and this in turn is affected by your income which is indirectly affected by the job market.

So to understand the impact of the spending cuts on the buying and selling market we need to ask the following series of questions:-

  • Will the spending cuts force more people to sell their property?
    Currently we are only selling half as many homes pre credit crunch and this budget is likely to ensure that less people are inclined to sell up and move on as their confidence in the future won’t be very high, so they are more likely to ‘stay put’, unless they are forced to sell. 
  • Will the job cuts force people to sell their homes?
    In the main the job cuts are expected to hit women and will be spread over four years. It is likely they will increase repossessions next year, but not by huge numbers. What is more likely is that job cuts in the private sector due to lower spending by the government will hit next year, so stock may rise, which will drive prices down. 
  • Will the spending and job cuts stop people buying?
    The media chatter and threat of more job cuts is likely to put people off buying at least until Xmas if not beyond, therefore it’s likely that buyers will be few and far between next year.

Impact of the Spending Cuts on Buying and Selling Property in 2011

Overall the property market will split in two across the country next year. Those areas hit hard by local authority and government spending cuts, job losses etc, are likely to see their property prices dip as demand remains low and more people try to sell their property.

Ideally if you do want to sell your home, only look to do so if you are trading up, so you save more money on your next property or if you have to sell.

If you are looking at buying as a first time buyer, then you may get a bargain. You need to carefully assess the true market value of the property, then if you can get anywhere between 10-20% off, this should protect you from further falls.

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Key Government Spending Cuts Announced:-

  1. About 490,000 public sector jobs likely to be lost
  2. Average 19% four-year cut in departmental budgets
  3. Structural deficit to be eliminated by 2015
  4. £7bn in additional welfare budget cuts
  5. Police funding cut by 4% a year
  6. Retirement age to rise from 65 to 66 by 2020
  7. English schools budget protected; £2bn extra for social care
  8. NHS budget in England to rise every year until 2015
  9. Regulated rail fares to rise 3% above inflation
  10. Bank levy to be made permanent

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