Tim Kellett
PAYdata Blog, 14 February 2011

Recent figures released by the Halifax indicate that house prices fell by 2.4% last year (and 0.7% in the last quarter, or 0.5% according to the Nationwide), the biggest annual fall since the recession started.

Meanwhile, the Royal Institution of Chartered Surveyors (Rics) says that the UK market has had a “sluggish” start to 2011. Analysts blame a number of factors for the current and continued malaise in house prices:

• A lack of demand from buyers
• A lack of quality new properties on the market
• The inclement weather since November
• Restricted bank lending

There is no doubt that the housing market is intrinsically linked with the outlook of the whole UK economy. Buyers will remain cautious until more positive news stories start to appear (and when will that happen?). Certainly, the spectre of mortgage rate rises later this year will not help.

To counterbalance all this negativity, surveyors have said that they expect sales to pick up in spring, as better weather will improve everyone’s mood! There are also indications that there are clear regional patterns - bad news for Yorkshire, Humberside and here in the East Midlands where prices have fallen, but good news for London.

The overriding impression from our customers, a number of whom operate in this sector, is that of stagnation for the foreseeable future. This is obviously affecting employers’ reward decisions. With companies continuing to struggle for work, it is hard to justify increasing pay. On the other hand, employees have had to deal with increasing living costs, with little or no pay increases for up to two years. Another difficult year ahead? Let us hope the economic outlook improves and therefore the housing market.

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