The housing market should remain buoyant, despite concerns that the UK is entering a period of recession.
Manufacturing is now officially in recession, with output falling for the second successive quarter. Output from the sector rose slightly in June, but fell by 2% over the quarter ‘ the worst for 10 years. The Government is now predicting manufacturing is set for a fall of 5% a year.
The news has prompted fears that job losses could spread into the service industries and dampen spending. This concern has been vindicated by new figures from the Recruitment and Employment Confederation, which claim job advertising in national newspapers fell by almost 20% in the year to June, again, the worst fall in 10 years. The Government’s own concerns were made evident in the latest quarter percent interest rate cut.
Alex Bannister, group economist at Nationwide, said that problems in manufacturing have already taken their toll on porperty prices in the industrial parts of England. He said: ‘The north east, north west and Scotland have already seen slower growth than the rest of the UK.’
Martin Ellis, group economist at the Halifax, said that although the economy is not heading for a full-blown recession, spending may be affected. ‘This is more of a slowdown than a recession. The service industry, for example, is now beginning to slow. This could have an adverse effect on consumer confidence and unemployment could rise later in the year,’ he said.
Ellis said this will have an effect on the housing market, but emphasised the situation is far from critical. He said: ‘We are not heading for a boom and bust, house prices have been rising by 10% a year and this is likely to halve to 5% next year. House prices will grow, but not as fast.’
Ray Boulger, technical manager at Charcol agreed a collapse in the housing market was unlikely, because the Bank of England has greater control now of interest rates. ‘Because of the requirement to keep rates within the Exchange Rate Mechanism, rates were kept too high for too long ‘ hence the past problems in the housing market,’ he said.