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.

Thanks all - very interesting to read your views on this. It’s clearly a very complex situation, which is why I was so keen to find out your thoughts, and for every poster saying X will happen, another poster is coming on to say Y will happen. Thanks again.

People have been saying this since I can remember being interested in the question, so since about 2000.

I don’t think they will OP

You do realize why the last correction happened. Because of US subprime lending and the banks nearly going bankrupt. Some did. Banks are in rude health right now. And we housebuilding is at an all time low.

The biggest difference between the uk and the US is land value and availability though.

This has become an increasingly acute problem in the UK in a way that's its not in the US, Australia and NZ.

Its a force that is much more acute in the uk and one we cannot ignore.

We can look elsewhere for trends yes, but we also need to consider in what ways our market is uniquely different too.

No. They won’t. At most they’ll stagnate and you might get a few sold off cheap from repossessions.

blackrock/private equity m is busy buying up property to let out, so they will keep prices up. And builders are not building enough, so until out population crash comes demand will continue to exceed supply.

In 2007 we were telling friend not to get a mortgage with Northern Rock. We explicitly explained subprime lending and the likely crash in the market. We bought planning for a recession and a dip in prices. We were also getting warnings from another friend who worked in the city.

To this day it has always pissed me off when politicians have said that no one could see what was coming when there were people who did and knew the details of what was the most likely scenario and how it played out.

Friend who bought with Northern Rock was utterly fucked. We resisted the urge to say we told you so.

This time around you can definitely see the long term market trends that are going to come in. It's stacked up in the demographics of an aging population with a fixed income and growing concerns over energy security and affordability - even if this crisis is short term, longer term concerns over climate change are definitely starting to be bigger factors in purchasing a house and how much its going to cost.

This is manifesting in things like greater attention to the risk of flooding. Mortgage lenders will increasingly assess affordability based on energy efficiency because people buying a house which is inefficient are going to be more of a financial risk to them. That's why it will catch up with valuations because of a tangible and measurable economic value.

Thinking about these things aren't off limits to people who don't do economics they are general knowledge issues and are logical.

People not being able to afford to learn to drive or getting too old due to an aging population to drive are definitely becoming bigger market drivers. It will affect where people will choose to live. Its not rocket science to work this out.

People have certain basis needs: food, water and accommodation. These are demands that are constant and don't decline. This is exploitable under certain conditions.

A smaller pool of ownership makes supply fixing more likely and this in turn makes market manipulation to generate profits for large investors more likely.

Again none of this lends itself to the idea that the market in the uk will crash. It still suggests that it will just become more unaffordable to new owners even if prices drop.

Which is why I keep stressing affordability as a measure to look at rather than property value. It is the affordability that's declining rather than prices increasing...

I think rents will need to drop, if tenants are struggling to pay their heating bills they can't take mortgage holidays and there's less incentive to keep up the payments than there is for a mortgaged property.

It takes months to evict tenants who have nowhere to go, and the council won't/can't help until the bailiffs arrive, by which time a BTL landlord will be racking up debts.

And many landlords rely on the high rent to pay their BTL mortgage so will need to sell up rather than reduce the rent.

It will then depend on whether the investment firms are still interested in buying up all the property to rent out. If they don't due to so many people defaulting on their rent payments then the housing market will drop.

"But that extra cost, now in effect has value compared to a period property. The maintenance cost and the cost of updating to control running costs has a tangible value in a market were concerns about long term energy costs are in the forefront of people's minds. "

That's interesting but I don't think it's pure chance that shares in housebuilders are being sold off. Just like in 2007, it's the first sign of a correction as informed people sell up.

What the potential downsizers want and need is the real thing to watch here. That's what's going to drive market forces

We’re going to have to move at some point in the next ten years, not necessarily to downsize but to future proof. What we’d ideally like is a three bed bungalow with a decent garden. Those haven’t been built for decades because they occupy a large footprint. Existing ones have often been bought by younger people and extended upwards. Put those two things together and essentially we’re looking for a unicorn - along with lots of other people our age. And there’s no point in moving to another house with stairs and no downstairs shower room/ wet room/bathroom as we wouldn’t get what we need.

I think they are increasing. There are so few properties on the market. My son has been trying to buy a flat in North Hampshire since November and despite offering full price, he’s been outbid by people offering over the asking price. There have been so few properties that tick his very reasonable wish list. He’s finally had an offer accepted at full asking price and I think that may be partly due to it being a quiet month for house purchase and people worried about the cost of living rises.

The unemployment rate is so low, there are so many unfilled jobs that there will be few people having to sell due to loss of income. And with the cost of living increase I would guess this will reduce even further, thr number of properties up for sale.

Increasing round me too.

I think certain areas are slow to drop and quick to pick up.

There is more of those in my area than normal because there are a lot of 60s built properties.

Compared with any other 3 bed you will pay a good premium of 80 - 100k

"The unemployment rate is so low, there are so many unfilled jobs that there will be few people having to sell due to loss of income."

Unlikely to remain low in a prolonged recession though.

Some areas are still rising because the housing market is like a tanker changing direction. But watch where it has started to stall as this will spread.

Don't listen to randoms on mn. Look at shares in home builders and other businesses that rely on a buoyant housing market as this will tell you what people with more knowledge than you or I are predicting.

Very few here @RedToothBrush. You’re dead right about the premium, as I said, it’s a combination of low supply and high demand, along with the relatively large footprint. We know that if we’re lucky enough to find one we’ll pay handsomely for it.

In general smaller properties sell for more £ per square metre than larger ones and this differential may increase as energy costs rise and inflation takes hold.

And it may be a mistake to think that the housing market will be as resilient in the medium term as it was in the 1993 and 2008 corrections. Landlords are nothing if not realistic and even they can't get blood from stones ie they can only increase rents if the going is good and are just as capable of reducing them at need always providing they have not borrowed too much. Small BTL landlords won't be able or willing to sustain an unrealistically high property market on their own and people who are currently struggling to get on to the ladder, thus keeping the market buoyant, may give the idea up and choose to rent if it becomes cheaper to do that.

I wondered why the Bank of England was predicting a recession by Christmas when I heard it on the radio the other day. It's not like them to talk down the economy. I can only think they were deliberately understating the case; they're really expecting a depression and are trying to manage expectations.

The oil price rise that lies behind all of this could continue for some time until all the world's big economies falter and start to flatline. Then it will start to tail off but by then it may be too late.

Meanwhile the property market may well crash as it did a century ago but if the banks are not able to repossess all the property they have invested in, they may collapse too. That's when things will start to get interesting because stock markets won't exactly be racing away. The banks very nearly did go down in 2007/8 and we, the tax paying public, bailed them out. It's doubtful that could happen again because we actually have't got the wherewithal after Brexit, Covid and the economic damage of climate change.

Of course property prices will eventually recover but that may not happen in time to save the fortunes of those people who have borrowed too much. Don't be one of them.

None of the pundits think the property market will fall, or if they do they are keeping schtum for fear of triggering a stampede. But never mind them. They've been wrong before, after all.

They are coming down in other countries going through similar economic issues - NZ, China, US. High interest rates have usually led to price drops and we haven't had inflation to deal with either during these times. Affordability is probably the worst it has ever been. This usually spells trouble.The only positive is employment levels are high, but we will see how long that lasts during a recession and COL crisis.

I don't understand how people think prices can keep going up forever. There is always a correction after this kind of a bubble. I just said to my OH this week that I'm starting to see lots of for sale signs going up and there was hardly any before.

Supply is low, but when people aren't using holiday homes or simply don't have the money to rent and keep defaulting on their what do you think will happen? It costs money to be a landlord that is dependent on rent getting paid.

Of course owners and estate agents will tell you the opposite, but you just need to look back through history to see what's ahead.

Statistically speaking, we are due a correction. Pre covid, I read the date was 2024. We are due a recession then, aren’t we? I would say house prices will decrease. By how much depends on Ukraine amongst other things.

They need to.

I bought my house 15 months ago and according to zoopla, it is now worth £57k more (20ish% rise). Which is ridiculous

Landlords are more likely to wait until prices dip before they buy. Covid has raised house prices artificially in the last couple of years .
I don’t think people will move / downsize unless they are forced.

I think houses with drop but mortgages will be harder to get .

Don't complain, sell it quick!

Sorry, that was for DmitriMendeleev.

@BorisJohnsonsHair
I think landlords will continue to buy houses as they know there'll be more renters during a cost of living crisis. So maybe not a huge downturn in prices at the lower end.

Why do you think they'll be more renters during the cost of living crisis?

If people can't afford a mortgage then they won't be able to afford rent which is often higher than the mortgage payments. Young people aren't going to move out of the family home when the gas and electricity is costing £4/5k a year, if anything the older ones will be moving back.

BTL has helped push property prices up, and when thousands of people can't afford either their energy bills or their rent they're going to default and the landlord will be without any rent for 4/6 whilst they go through the long process of eviction.

And that's just based on the domestic increase, many people are going to lose their jobs as companies go bust making the situation even worse.

The company I work for has had the estimate in for next years electricity bill, it's nearly £500,000 more for 1 year. It's gone up from approx £175k to nearly £700k, so many businesses are not going to be able to afford this percentage of rise.

Unless something changes regarding the energy prices (and I dont think it will) it's going to be a disaster

You can get rent paid by housing benefit though.

I think stagnation is inevitable & I think there may be some drops in expensive areas (not mayfair expensive) because so much house price growth is driven by equity. FTBs are older now, buying a more expensive "bottom rung property", they tend to already be earning well so it's much much harder to build equity.