The consumer spending boom is over and the UK will look to save a growing proportion of its income over the next few years, having knock-on effects for the housing market, according to a new report from the National Institute of Economic and Social Research (NIESR).
The Institute claimed that while consumer spending has grown at more than 4% a year for the last seven years, it will grow at less than 2% in the three years to 2005, as real income growth has slowed at the same time as taxes on income have increased. However, it does not think the Bank of England will alter its monetary policy to compensate as long as it maintains its focus on underlying inflation.
This contrasts with information from the Royal Institute of Chartered Surveyors (RICS) which reports that the declining house prices in some areas of the UK have now stabilised, particularly in the South East and South West, and there was an upturn in the number of new buyers in the last month. In June, 10% more surveyors reported a rise in buyer enquiries than a fall, compared to 17% more reporting a fall in May.
Surveyors noted receding fears over large price falls have led to a slowdown in the number of new sellers coming into the market, which will limit increases in housing stock and so push house prices up.
John Walker, a RICS member at Fallowell & Partners based in Swadlincote, Derbyshire, said: ‘Prices have stabilised, with relatively keen competition at the lower end of the market. Properties on the market are evenly spread, and interest in properties of all prices has been re-established.’