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How do you define a property market crash?

Journalist: Marc Shoffman, Freelance

ended 31. August 2022

There is an official definition of a bear and bull market for stocks, but how does one define a property market crash?

Estate agents and property commentators, I am keen for comments on how you officially know when the market has crashed? 

Is it the percentage change in asking prices? Over what period? Or is it supply/demand/downvaluations?

 

8 responses from the Newspage community

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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
A housing market crash is caused by the creation of a bubble that bursts. This bubble is normally caused by easy monetary policy. We have had that for the last decade, but we have also had strict affordability criteria, so I don't expect to see a crash any time soon. You can have a slow down, or even modest decline, in property prices without that constituting a 'crash'. This is just a reflection of the underlying economy. I would say that, to constitute a crash, prices would have to decline by a minimum of 10% and that would need to be over a maximum of 12 months.
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Mike Staton
Director at Staton Mortgages
A property crash is a period of time where you see a reduction in property prices, usually caused by lack of demand. One major sign is an increase in for sale signs, which would indicate a lack of buyers. During the Pandemic, we experienced the highest amount of downvaluations that i can ever recall, this had no impact on the house prices still increasing in the UK. Due to the huge demand we are still seeing, i think we are a long way off from a property crash
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Imran Hussain
Director at Harmony Financial Services
The best way to define it would be an over supply of housing to the market and demand tailing off and mass price reduction in asking prices but right now the demand seems to remain strong and is likely to remain even throughout the recession.
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Graham Cox
Director at Bridging Hub
A 5%+ year-on-year drop in property sale transaction prices would be a pretty reliable indicator the market has crashed. But you would also see it in vendors dropping prices by larger percentages, lenders pulling 95% LTV mortgages, and prospective buyers refusing to pay the full asking price.
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Rhys Schofield
Brand Director at Peak Mortgages and Protection
However you define it, we aren't in a crash. Prices are still going up, there are multiple buyers for most properties, we still have a shortage of available stock and average time on the market to receiving an offer continues to trend downwards. You then look at the alternative to owning a house which is renting and agents tell us for every new listing they're getting 10 plus enquiries. So whilst we are entering choppy economic waters we can't escape the fact that we have a nationwide shortage of housing which makes a full blown crash pretty unlikely.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
How would I define a property market crash? It's a great question and I'll admit, not something I had ever thought about before, until now. I think I'd probably say that a crash would be sharp and deep reduction in house prices; so maybe a fall of over 20% in a quarter would be a crash? Anything less marked, or over a longer period, could likely not be defined as a crash per se; still troubling, but the word crash feels like a very sudden and violent stop.
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Jamie Thompson
Mortgage Broker at Jamie Thompson Mortgages
People keep banging on about this impending property market crash. Yet banks, who quite like to make money, and a quite good at doing so, are still offering mortgage with just a 5% deposit. If they thought for a second there was about to be a crash they'd be pulling 95% LTV (5% deposit) mortgage products faster than a magician doing the table cloth removal trick. When I see that is when I believe the doom mongers have, like a stopped clock twice a day, finally got it right.
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David Robinson
Co-Founder at Wildcat Law
A property Bear market is where the supply of property outstrips demand. It is usually caused by a wider economic recession and lags unemployment rates. Why? Because it takes a few months of non mortgage payments to trigger repossessions. True bear markets in residential property are rarer therefore than recessions and with the current shortage of housing stock in the UK compared to previous recessions, a bear market is still not a forgone outcome currently. Stagnation not crash is a more likely outcome.