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The i Paper - are we heading for a house price crash?

Journalist: Sarah Davidson, Freelance

ended 23. June 2023

Is a house price crash inevitable? 

How bad could it be?

How long would it last?

Where in the country will be hit hardest?

How would a crash and the consequent negative equity affect that downward move in HPI? 

 

Snappy comments please! 

Thanks

11 responses from the Newspage community

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Editor
Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Bailey the bean counter is no real economist. He can only see what’s under his nose. This rise will tip the UK into a severe, protracted recession and he will have to think about he deals with the deflation around the corner once prices rises caused by energy spikes fall out of the system. These rate rises have battered homeowners and renters, as mortgage rates push up rents. House prices, that have remained stagnant, will soon fall as homeowners can’t afford their mortgages. They have been hanging on for too long, and can’t weather the storm until rates will have to be slashed again next year. This is so short sighted it’s painful to watch. It makes no logical sense as it’s a proven failed policy of trying to handle inflation caused by supply shocks. It’s beyond satire that the government are meeting to mitigate the effects of the rate rises, which begs the question ‘what is the point?’. Sunak should have Bailey’s P45 in the post tonight!
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Scott Gallacher
Director at Rowley Turton
A house price crash isn't inevitable, especially as in recent history the government has always stepped in to prop up the market. However, it's definitely a looming risk. With rising interest rates, we're already witnessing buy-to-let landlords scaling back their portfolios or exiting the market altogether. This increased supply of houses for sale could potentially drive down prices as they rush to unload properties and escape high borrowing costs.

Homeowners need to brace themselves, as it could be a rough ride. Most of us aren't old enough to remember a proper crash like the one in the eighties. Back then, house prices plummeted, with some regions experiencing declines of over 30%. The market suffered from high interest rates, economic instability, and oversupply. Many homeowners found themselves in negative equity, where their outstanding mortgage debt exceeded the value of their properties. It took several years for the market to recover fully
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Jamie Elvin
Director at Strive Mortgages
All the ingredients are in place for a major house price crash, and at this point, it appears inevitable. I expect prices to fall by as much as 20-30%, with the most significant impact felt in areas of the country like the southeast, which experienced astronomical house price growth following the pandemic.
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Kundan Bhaduri
Property Developer and Portfolio Landlord at The Kushman Group
With soaring property prices, concerns over a potential house price crash are understandable. While not inevitable, the current inflated market raises legitimate worries. The severity of a crash would depend on economic conditions, interest rates, and market sentiment. Recoveries from past downturns have taken years, and the duration would vary depending on the crash's scale and external factors.

Areas with significant price growth and industry dependency may face a sharper correction, while the impact would vary geographically. Negative equity could become an issue as homeowners owe more than their property's value, hindering mobility and pressuring house price indices through distressed sales and increased supply.

Vigilance, prudent financial management, and an understanding of market trends will be crucial for homeowners, investors, and policymakers to navigate this uncertain landscape.
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Austyn Johnson
Founder at Mortgages For Actors
Not inevitable, but possible. There are a lot more protections in place than 2008.

Those who bought expensive properties with very little deposit are at risk, their payment is a big one, and if the cost of living goes up too much, it will just be a total struggle. Can they sell? Only if they are still in positive equity.

As the rising rates are not affecting the inflation rate, it could last a while unless something dramatically changes. BUT, people are still buying today and will be for years.

I believe London will be hit hard, lots of high loans and high mortgage payments there. Prices are high too, so a fall in value will hit them all the hardest.

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Jamie Lennox
Director at Dimora Mortgages
With the current economic outlook, it's hard to look past the fact that house prices will drop in the years to come. How much by is the million dollar question, with a lot hanging in the balance on how much pain is brought on by The Bank of England with further rate rises. With higher rates, we will naturally see a sell-off from homeowners who can't afford these higher rates that are now available but while house prices are so high there is already a lack of appetite for many to buy until they come down.
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Graham Cox
Director at Bridging Hub
Barring any major government intervention, a house price crash is almost certain. I believe a fall of twenty percent in nominal property prices over the next 2 years is likely, around 30 percent in real terms. Which in the long run will be a good thing. The only question is how much pain there will be in the meantime.
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Joe Garner
Founder & Managing Director at Joe Garner Consulting
There are signs of a potential house price crash due to rising interest rates, high inflation reducing spending power, and adjustments in borrowing costs. The severity and duration of a crash can vary depending on economic factors and market dynamics.

Generally, areas with high price growth leading up to the crash may experience more significant declines, but local factors can also play a role.

In the event of a crash, negative equity could become a reality for homeowners. This situation can make it difficult for homeowners to sell their properties without incurring financial losses, potentially decreasing housing market activity.

Market conditions and economic policies can change over time, impacting the direction and magnitude of any potential crash.

Until we have political and economic stability it is unlikely that the housing market will be anything but a chaotic uncontrollable mess.
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Nick Harris
Co-founder at Quarters
I just don't see it. Locally prices have been stable for the first half of the year with no down valuations and plenty of buyers and multiple offers for sensitively priced properties. Get the price right and you can still move folks!
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Gary Bush
Financial Adviser at MortgageShop.com
A Nationwide property crash isn't likely in our opinion, the South East and London are however possibly due a correction after the disastrous inflation figure of yesterday and the Bank of England increase. Am not sure that negative equity would be a thing as the country has been mainly pitched on mortgages of <85% for the past 5 - 10 years and so truly negative would take a number of years to appear and "hopefully" this crisis will be over by then.
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Ashley Thomas
Director at Magni Finance
The house prices may reduce but it is unlikely it will crash. There is still strong demand, a lot of people have decided that they might as well move forward and purchase rather than wait as they don't know when rates will go down and if so, by how much.

Some are considering purchasing at a lower level to ensure they are not stretching too much.