There was, therefore, a four month lead-in time to the CSR with much press speculation on where the axe would fall and the possible longer-term impact on the UK economy. This was not a context to engender confidence in the housing market. The Halifax index, for example, showed consistent negative quarterly returns for national house prices from April 2010 onwards. By the end of October 2010 annual growth in the index had been cut to 1.2% from 6.9% in May 2010.
UK volume housebuilders attributed a weaker than expected autumn selling period, second only in importance to the spring, to a lack of confidence caused by the build-up to the October CSR. Barratt, the UK’s biggest housebuilder by volume, blamed the combination of the lead up to the CSR along with the lack of available mortgage finance. In November, its chief executive Mark Clare commented, “It won’t come as a surprise to anyone if I say the autumn selling season was more challenging than we are used to. But there was a lot of media speculation about what was going to be in the spending review and potential buyers decided they didn’t want to make a big financial commitment until there was more certainty.”
In the CSR the Chancellor announced cuts in public spending of £81 billion between now and 2014-15. £46 billion of these savings are to come from cutting departmental running costs, with the Government aiming to reduce public sector employment by up to 490,000 by 2015. Inevitably there will be knock-on effects for the private sector. There is a broad consensus, however, that the impact on the economy will be most strongly felt in the regions where the public sector forms a higher proportion of economic activity. For central London property, including Midtown, City and Docklands, the local impact of the cuts proposed in the CSR is likely to be less significant.
The availability of mortgage finance remained problematic and is likely to ease only marginally in future years. According to the Council of Mortgage Lenders (CML) gross lending in October 2010 was estimated at £12.4 billion, the lowest total for the month of October since 2000. The monthly average in 2007 was in excess of £30 billion and the CML commented that the mortgage market remained “subdued”. Net lending was weak, amounting to only £112 million in September 2010, down from £1.62 billion in August according to The Bank of England. The number of mortgages approved for house purchase in September was 47,474, a fifth consecutive monthly fall and the lowest figure since February 2010. The Midtown, City and Docklands markets, however, are partially insulated from the weakness of the mortgage market by the greater proportion of equity-rich and outright cash-buyers.
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