To think property prices will go down in next year?

[WagathaChristieMystery]

With the ongoing cost of living crisis and the possibility of a recession, I wonder if house prices in the UK will fall over the next couple of years?

I know we have a really serious shortage of houses in the UK, which is one of the reasons house prices are particularly high, but I’m wondering whether the cost of living crisis will lead to house prices dropping.

Prices are held up by people buying houses as investments. The institutional investors are getting in on thus now and there are funds set up to invest in individual properties in the way they already invest in blocks of apartments.

I think that our children's generation will have to rent and property ownership will become rare. God knows how they will afford retirement.

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I am always too bearish, but I think it’s possible that the combined crises of fuel inflation and rising rates will push prices down.

I looked in our loca

🙄local EA yesterday and there were only two properties under £800,000
just normal houses , not overly big, it’s a nice area but £800,000 ???

Who knows. If energy prices affect employment and interest rates it will make things very difficult but I dont know about things like investment companies overseas buyers and government schemes.

In 2008 my area stagnated, and the crash before prices dropped.

I can see prices stagnating for a while. But at the same time as demand goes down so does supply. People hunker down and stay put. This is not good for trades as things like new kitchens and bathrooms tend to tie in with new homes.

We went through negative equity in early 1990s then value decline in 2008. Here we go again!

One of the big differences between the UK housing market and places like the US is availability of land to build on. There is only so much land in the UK.

Very unlikely that average house prices will go down.

Supply is not matching demand, so there is an issue. So I am not expecting a market crash.

Its going to be more complex than that because of a couple of other factors.

I am expecting more houses to be on the market, which might improve the fluidity of the market. In my area one of the reasons prices have been driven so high is because there has been an unusually low number of houses available to buy. So I think there will be more choice.

One of the reasons there will be more houses available is due to people reconsidering the type of property they own and looking for something more energy efficient and because people look to downsize because they cannot afford to keep the home they've got.

I expect larger homes and period properties to perhaps be the ones that are most likely to appear. And I think there will be slippage in price at the top end of the market as the demand there will drop. But this isn't going to be a consistent thing throughout the market.

I expect there's going to be MORE demand in the middle and bottom of the market where there is already a particular shortage of housing stock compared with demand. Developers spent years milking the market with 'executive detached' properties instead of smaller middle of the market properties. But no one will want / be able to afford.

You are going to get elderly couples wanting to downsize but perhaps not to 1 or 2 beds. And families will continue to want family homes. So everyone is going to be chasing that perfect small 3 bed.

The market will almost pancake with a depression in prices at the top but increases in demand in the middle making it harder for couples and young families to move up and be able to compete with the elderly cash buyers. Which in turn blocks the bottom of the market and first time buyers from getting on.

Until you start seeing the defaults and repossessions, particularly in the rental sector. Where it will hit is people who over stretched and bought a second property to 'get their pension' so people who aren't professional landlords. Renters are going to be the ones most likely to default as they have less to lose by not paying rent than owners do not paying the mortgage. Plus they are generally more likely to less able to afford to pay in the first place. Owners can potentially switch to interest only mortgages which sucks but is still an option. That's going to screw a bunch of buy to letters.

At that point you will have a glut of property come on to the market. It's not going to be the opportunity to get onto the market for the first people might think though. Remember those cash buyers looking to downsize? This is a market where cash is king. There is going to be a massive squeeze on lending due to affordability calculations reducing the amount mortgage lenders will give borrowers. And the spectre of rising interest rates further compounding the problem. So the big professional landlords who are cash rich will probably be able to capitalise here too at the expense of smaller ones. That means greater monopolies for big landlords which isn't good news for renters.

And then those bigger properties... Expect more rentals available for bigger houses, perhaps at a decent price. Those downsizers will struggle to sell but will be able to rent. And I think that's going to be the significant difference overall in the market.

That and the fact that inefficient period properties are going to get a lot harder to sell. Mortgage companies will be less willing to lend on them. Expect the criteria for borrowing to get strict in terms of energy inefficient properties. Poor insulation = no mortgage. You will see the burden fall on owners wishing to sell with this one. A few people are going to be suck with money pits they can't sell and can't afford to renovate. If they can't afford to keep the property they are going to be utterly screwed.

So in summary:

1. Bottom of the market still stuck due to squeeze on credit and people unable to move up. More big landlords able to monopolise the market which is bad for renters.
2. Middle of the market more movement but prices stagnant or continue to rise due to pressure of demand. Market favours cash buyers.
3. Top of the market. Demand flat. Stagnant prices. Market propped up by more by prices in the middle of market rather than demand. Desparate sellers may mean that there a few good deals to be negotiated due to fewer buyers wanting / able to move up. Property takes longer to sell. More rental properties available, some potential at more favourable rates for those who can afford the cost of energy to run them. No crash in prices though.
4. Those in period properties get stuffed and can't sell easily.
5. Properties who have solar or other energy efficient equipment go up in value. Until now putting solar panels on your roof hasn't added to its value. I'm hearing its now adding at least £10k effectively offsetting the cost of installation completely. People don't want the hassle of installation / can't get installation due to demand and lead times for installers.

But crucially. No crash.

I'm old and have lived through the price crashes in the 90's and 2008 and in my experience people will hang on to their houses no matter what. They will literally sacrifice ANYTHING other than the roof over their heads so even if energy prices double they still won't downsize. What they might do, if they have to, is cut out meals out/takeaways/holidays/fancy cars/nails/netflix/botox/gym membership - yes, most people can weather the utility storm by giving up non-essentials.

That’s about the fifth “house prices coming down” thing I’ve read in the last week…

I don’t think it’s going to go away

Yanbu. They went down a lot in 2007-8 a not all houses but there were some amazing deals around. I’m expecting something similar next year.

@RedToothBrush excellent analysis

The serial BTL investors who have money will buy them up. There'll be fewer people buying to live in them themselves as they're the ones who can't afford stupidly high house prices on top of increasing interest rates and on top of higher power/food/fuel bills. So more people who have to rent, hence the BTLers will continue to buy up.

Maybe, but I wouldn't advise anyone hold off on buying on that 'hope', what could be saved in a temporary house dip might be counteracted by a higher interest rate. As others have said, dips tend to be short term.

And because these housing providers for social housing are run by inept idiots who take high salaries and rip off everyone in the process.

They also fell quite a lot in the mid 90's. We bought in 1997 and paid roughly 25% less for our house than it was bought for in 1990. The sellers lost a shed load of cash on it but had to move as the husband's job was relocating. Their loss, our gain, as the house price had recovered a few years later and has since trebled to it's current value.

You don't seem to understand how money works with a view like that

Why would I take a £50k hit on my house to save £5000 a year for a short term period?

Energy prices won't stay this high forever, inflation will die down at some point

It's predicted we will only be in a full recession from 2023-2025

I think they will drop if not crash. But that is because house prices were ridiculous. Then the cost of living, increases in interest rates, increases in mortgage terms. I'm already seeing lots of significant reductions and lots of houses for sale as well as some repossessions.

Something will give soon.

I agree.

I bought my houe for £250k five years ago. Lately, similar houses have been fetching £400k. Even a 25% drop in the market, from where it is now, would still be a 20% increase in 'value' over 5 years.

Plus, what happens when prices drop is people stop selling, unless they really have to, which reduces availablity and off we go again.

Housing will surely only become fair/affordable in price again, be that to buy or rent, if we have a government that actually wants to seriously tackle the issue. Controls on BTL's, second homes, far more plentiful social housing, incentives for older people to downsize, an end to salary stagnation and massively increasing the amount of homes being built.

Doesn't seem likely does it? With this current bunch of bastards.

Surely something has to give at some point though. I often wonder what is going to happen when all the millennials/Gen Z for whom it has become near impossible to buy a house, become elderly, with no assets due to not owning a home, not having savings because of living day to day etc. Won't be possible for them to pay for care! So how does the state pay for that at that point?

It's absolutely disgusting how much living standards are declining in one of the richest countries in the world. What an abject failure of a state who treats its citizens with such contempt.

Depends on the interest rates I think
If they start going up and up again that might make a huge difference especially with such high energy costs almost predicted to be another mortgage payment too.
It could be terrible for everyone and prices might drop , but hanging on your home is so important if you can : might be tough for many though :(

I do not think the government will intervene. All the messaging seems to be to support other countries whilst we've got more food banks than McDonalds. This is about PR.

When you've got a grocery store giving loans, pay day loan companies popping up it doesnt look good.

Yes of course if people can they will stay in their homes. But some bought at the height of the market based on what they knew then (working from home so saving commuter expenses, cheaper energy and food) and some will have cut it very fine. Some also will have every penny accounted for so any increase will cripple them. Money concerns breaks relationships, landlords will sell to keep themselves afloat.

A lot of houses that would have gone quickly in my area are now sitting on the market for ages. New build executive home have been stuck for nearly a year
Now.

I suspect overpriced and the market has peaked

I think they'll stabilise. They've already started coming down in my area and houses have stayed on the market longer as well. Moving is expensive, maybe people will sit tight until 2025.

My friends bought in the boom in the 2000s, just before the crash. They still feel stuck. It's a shame.

I think people hold off making decisions during times like this. I don't see many people falling pregnant either, especially if they require a bigger house to do so.