House prices: Expert discusses 'interesting' pricing differences

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Homeowners and buyers have enjoyed historically low-interest rates and a huge boom in the value of their homes over the past two years. But this could all come crashing down as the UK’s economy is forecast to drop into recession later this year or early in 2023.

The UK’s economy is in turmoil, with inflation predicted to reach 13 percent in late 2022, spending power eroded and house prices already falling, albeit only by 0.1 percent in July.

But despite only a modest drop so far, Gary Hemming from ABC Finance has explained that historic house price data shows a tumble in home values could be about to happen.

He told Express.co.uk: “If we were to see the same drop as previous recessions, we could see homeowners losing significant amounts of money over the next 12 months.”

During earlier recessions, even when adjusted for inflation, house prices were far lower than they are now.

The market largely consisted of people who wanted to buy and sell their home, with far fewer private landlords buying up property and driving prices upwards.

As such, a recession would see less of a swing in demand, as a home was often for life, with less regard for turning it into a profitable investment.

Mr Hemming said: “This allowed property prices to remain fairly strong, even in spite of a nasty recession, which was a great sign for property owners.

“That said, the property market has changed significantly in recent years, with property now seen as an investment and supply and demand becoming a bigger factor to prices, meaning that since 1989 the picture is sadly, a little bleaker.”

Property prices fell significantly during the recessions of 1990 and 2008 – and it’s likely we will see a similar drop in the upcoming recession.

The recession of 2008 saw the average property owner lose almost £30,000 on the value of their home in just 12 months – a drop of 16.53 percent

But things are about to get much worse for those who have owned their properties for decades and new homeowners alike – especially those who have bought in the recent coronavirus property price boom.

Mr Hemming continued: “If property prices were to drop by the same percentage as they did during 1990-1991, the average house price would fall to £250,482.17 – a drop of £35,517.83!

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“If we track the 2008 recession, we’d see a drop of 16.53 percent. This would reduce the average house price to £238,715.85.

“This would see every homeowner in the UK lose an average of £47,284.15!”

Unfortunately, this catastrophic dip is unlikely to resolve itself in the immediate aftermath of a recession.

Mr Hemming points out that “house prices didn’t exceed their pre-recession levels until 1998 – eight years after the recession began.”

He said: “Additionally, when house prices dropped in 2008, they took seven years to beat their previous highs – topping previous highs in 2015.”

Mr Hemming urged the Government to take action over a potential housing market crash, saying: “The Government hold the key here – they’re the people with the power to protect house prices.

“Whether they choose to do so remains to be seen.”

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