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Are we headed for a house price crash?

Journalist: Jon King, Daily Express Online

ended 15. July 2023

High interest rates have paralysed the US housing market with property prices falling sharply and mortgage applications plunging to their lowest level for nearly 30 years. UK newswire, Newspage, asked property and mortgage experts if they think Britain is about to see a similar disaster.

 

10 responses from the Newspage community

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Editor
Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
The UK housing market is on a precipice, clinging on by its fingertips and recent rate rises will mean it can no longer take the pressure. The Bank of England has gone too far, piling more misery on homeowners. With 2 million households coming off fixed rates over the next couple of years, they will be paying an eye-watering £6,000 extra per year on their mortgages. Any sane person realises this will trigger a colossal crash in the housing market that will make the global financial crash seem like the good old days. A depression in house prices of 25% isn’t out of the question if the central bank doesn’t reverse its position on rates quickly.
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Editor
Bob Singh
Founder at Chess Mortgages
The writing is on the wall. With intense media coverage and high profile pundits weighing in, the prospect of a severe correction is real. The mortgage lenders charter has confirmed even the Government is worried about the effects of such high interest rates, combined with a cost of living crisis. Stubborn UK inflation and further base rate increases in the offing have sent swap rates spiralling of late. With sales volumes sharply down and mortgage applications dwindling, this will hit confidence and is going to result in price falls for sure. The silver lining is US inflation fell but even their real estate sector is faltering. The UK desperately needs a good set of inflation figures to ensure the slight downward trend in the swap rates continues further. Rishi Sunak needs to deliver on his pledge to halve inflation by year end or face political oblivion.
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Riz Malik
Independent Financial Adviser at R3 Wealth
The halt on repossessions as outlined in the Mortgage Charter will stop a freefall in UK property prices, at least for the upcoming year. However, the UK's delay in dealing with inflation has not only left us lagging behind the US, but also in an increasingly perilous situation, particularly as we opt for shorter-term fixes. Apart from during lockdown, I haven't seen it this bad for a very long time.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Whilst a price correction is long overdue in the UK housing market, the lack of supply from not building enough houses over a sustained period and reasonable demand despite increased mortgage and living costs should mean a less dramatic decrease in house prices on this side of the pond.
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Graham Cox
Director at Bridging Hub
A house price crash is happening right now. We just can't see it yet, due to the huge lag in reporting between prices being agreed, mortgages being offered by lenders and transactions showing up on the Land Registry house price index. The peak was last August and property values have already fallen around 5% since then. It's likely we'll see the Halifax and Nationwide start reporting very sharp house price falls of 1% or more per month later this year or early next. As mortgage rates soar, buyers simply can't borrow as much, and therefore can't offer as much. And a flood of homeowners will be forced to sell because refinancing their current deal is too expensive. All this will lead to lower house prices. A 25% fall in property prices from peak to trough is entirely possible. Adjusted for inflation, it could probably be around 35%.
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Jonathan Gordon
Director of Wealth Management at IP Global
Property prices will not crash though they are likely to be on a downward trend for the foreseeable future, at least until interest rates top out. In 2009 they fell by approximately 20% in 16 months caused by a lack of mortgage finance in the market. There is no shortage of liquidity today and this, together with a chronic undersupply will underpin the market. For example, in 2023 the UK will require 340,000 new homes with only 120,000 being built. At the same time, the issues of undersupply in the rental market will continue to push rents upwards causing further stress on household incomes.
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Stuart Crispe
Founder at Sunny Avenue
House prices will absolutely fall further. The media have scared anyone considering buying away. The doom and gloom has been self-fulfilling. I expect prices to continue to fall until we see inflation back at its target in Q2, then the Bank of England will be considering lowering the base rate again to deal with the recession.
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Rob Gill
Managing Director at Altura Mortgage Finance
While a 10%-15% fall from the recent peak in house prices cannot be ruled out, history suggests than anything more extreme would be countered by government action, for example, a new version of Help to Buy, support for mortgage lenders or a stamp duty holiday. Successive governments have used a variety of policies to boost the housing market when it hits trouble, and only the naive would rule out them doing so again.
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Stephen Johnson
Business Manager at Chandler Hawkins
I certainly hope that the UK housing market has a firm retracement after 12 years of price increases on the back of a false economy. Years of ultra-low interest rates and then political interventions after a failed covid policy with stamp duty breaks added to the over-inflated house prices and inflation problems we have today. I would expect to see "in normal times" a 30% drop but, I am sure the politicians will think of something else to keep prices up.
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Joe Garner
Founder & Managing Director at Joe Garner Consulting
The US have potentially saved themselves from a deep recession and major house price crash by acting quickly and decisively. Whilst unemployment rates are low in the US, we have seen a house price crash as interest rates rise to stave off inflation, this is slightly unusual and equally as concerning. We have been slow, indecisive and caught on the back foot in the UK with the Government asleep at the wheel and are likely to pay the price for this. House prices are likely to drop, people will likely lose their homes and businesses and it appears that we are just going to sit and watch it happen.