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Investment Firm Predicts Rise in Distressed Sales

June 7, 2012Article by Ray Withers

For anyone who thought that the best opportunities to purchase UK BMV properties was passed, think again. International property investment consultancy Property Frontiers has highlighted the likelihood that the government cutting jobs in the public sector will lead to a new wave of distressed sales.

The Chartered Institute of Personnel and Development (CIPD) has predicted that the government will cut 50,000 public sector jobs over the next nine months in the first £6.2bn phase of cutbacks. The Manchester Business School predicts it will be twice that amount. Regardless of the exact figure, we know it will be high, and, so too will the increase in UK BMV properties according to Property Frontiers.
Director of the firm David Cox said in a recent press release:

“Many people have started to suggest that the best opportunities for UK property investment have already passed, now that repossessions and distressed sales are levelling off and reducing respectively.

“My thoughts on the validity of these claims aside, the government is expected to cut between 50,000* and 100,000** jobs in the next nine months. Given that 65% of public sector workers are homeowners, this will undoubtedly bring more distressed sales as the newly jobless must sell to avoid recession. Not to mention those who have relocated and must now move back, who will also want an expeditious sale. The job cuts could also mean reducing demand, bringing prices down further and making it easier for investors.

“The final point is that many of those selling up will be looking for rented accommodation, thus will become tenants for property investors for the most part. Of course some of them may go for the sell and rent back option.”

The north of England, Scotland and Wales are expected to see the highest number of job cuts, and therefore distressed property sales, because the public sector forms a large proportion of the workforce in these areas.

Lest we not forget that this is only the first wave, a precursor to 4 years worth of much larger cutbacks to be outlined in the 22 June emergency budget. This could lead to 750,000 job losses, according to the CIPD.

Others have picked up on the link between job losses and the public sector cutbacks:

“Redundancies will increase the supply of homes to the market, as those who relocated north move back south for private sector jobs. With demand still at 50% below peak levels, this will have an impact on prices,” came the stark warning from David Adams, of Chesterton Humberts estate agency.

“There will also be an impact in areas where there are companies with large government contracts,” he added.


Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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