House prices and recession

[Mumof22020]

Whats everyones thoughts on house prices are they likely to come down in price if theres a recession? The prices are crazy at the moment and with the cost of living going through the roof we're surely going to hit a recession.

Lower priced homes prices won’t drop that much (as there will always be a demand for those from all sectors) but dearer house prices will drop as people downsize due to the cost of heating large properties and the lack of people wanting them.

However what was considered ‘large’ before may have changed now many people are wfh and require extra space to use as an office.

So it will be interesting to see if 3-4 beds stay the same price but larger fall in price.

There’s such a shortage of housing in the UK and people have made so much money off it I just can’t see a significant drop.

Those with cash will just buy up anything that drops and rent it till it goes up again. But I could well be wrong as I’ve been expecting a drop for years!

I think wfh will be a key factor - if offices push people back into cities we will see another change.

For prices to crash supply and demand need to move in opposite directions (supply up and demand down). And I just can't see it moving enough to cause a crash.

• today there are some very good fixed rates still on offer. As in below 2% interest on 40 year terms.
• people will do almost anything to not default on mortgages and have to sell
• there maybe a few downsizes but post-pandemic Gardens and room to WFH is important for some/many
• depending upon what sector you work in the 'great resignation' has led to staff shortages and rising wages. This for some will help offset inflation.
• people will cut extras (unfortunately in you work on those sectors usually hospitality and leisure first). As I always say I go on holiday for a fortnight, I live in my house the other 50 weeks a year.

There is likely to be a divide in who is impacted, potentially similar to what we saw with lockdown 1 in 2020.

There just won’t be a big drop. A small dip maybe but it’s not likely to come for a while. Supply vs demand means prices will continue to rise. Haven’t you read about the frenzy of people trying to view a house as soon as they come in the market? There are far more buyers who can afford the high house prices than there are houses available. Couple that with low interest rates, means that prices won’t drop. It would take a significant rise in rates for credit to become expensive and impact house prices and the government just cannot afford it so won’t allow it to happen.
Rising cost of living doesn’t impact home movers as much as less of their household income is spent on basics like food/fuel which is what’s rising. They will just save less than they are currently doing. This impacted will be the lower income households who already may have struggled to purchase a house or raise a deposit for one.
Even if there was a recession, it doesn’t mean everybody can just go and buy a cheaper house. Banks will tighten lending and you will need a high LTV and Those struggling to buy now won’t have the funds to do this anyway. Supply also diminishes as less people want to sell due to uncertainty and so prices don’t drop too much.
It amazes me that people think a recession will allow everyone to buy a house that can’t afford one currently. You need lots of cash in a recession to buy a house and interest rates will plummet again

@FinallyHere

what happened to the uk property market in the early 90’s.

I sold a jointly owned house and bought one by myself in the very early '90s.

There were a few scary moments when our buyers reduced their offer, I think, two or three times. On each occasion, I passed the info onto the people selling g my house. Each time they agreed to split the difference. No impact on me because I was sharing the selling price with exDP and then sharing the buying price with the person I was buying from.

Not ideal, but not the end of the world. I stayed in the house for ten years and the price went up significantly in that time.

I knew of people in negative equity riding out the storm. Others in negative equity, whose relationship had run its course and wanting to split up, but stuck together in a one bedroom flat. They had to take the hit.

In those days, 100% plus mortgages were not unusual, so it was possible to wrap up your equity loss into the mortgage for the new house.

Still better value than renting over a decade or so.

I knew a couple who had 3 kids in a one bedroom flat. They were in negative equity, first time buyers were going for 2 beds as the prices had come down and the one beds just wouldn't sell. It was a nightmare for them.

The problem is the government don't have any trump cards left rates have been so low for so long . It depends on how inflation gets but they may have to jack up the rates even more it's going to be a rough few years I'm not even going to guess what happens to property.

High inflation gets*

As in below 2% interest on 40 year terms.

who is offering that?

@WalrusSubmarine

There’s such a shortage of housing in the UK and people have made so much money off it I just can’t see a significant drop. Those with cash will just buy up anything that drops and rent it till it goes up again. But I could well be wrong as I’ve been expecting a drop for years!

I think wfh will be a key factor - if offices push people back into cities we will see another change.

I remember people saying that after the 1973 crash, It can't happen again. Then the 89 crash happened and then the 2008.

It might not happen but it is surprising how quickly things can turn around as I learned to my cost in 1973.

@veevee04

The problem is the government don't have any trump cards left rates have been so low for so long . It depends on how inflation gets but they may have to jack up the rates even more it's going to be a rough few years I'm not even going to guess what happens to property.

That's just it isn't it, it is just guesses but some people are more sure of their guesses than others.

@Mumof22020

I thought if there was a recession the house prices would drop, would this not be the case?. I was speaking to a friend about this and they said the house prices could possibly fall around 20% are they being daft?

The trouble is that interest rates will rise, making borrowing far more expensive. So even if prices do drop, it doesn't make property any more affordable.

Spoke to estate agent today about this. He said more potential buyers than houses coming on the market so prices still high. He said there a still good mortgage deals around.

Historically there hasn't been a one size fits all impact of recession in the UK in the past.

Following 2008 recession, in parts of the North it took until about 2020 for house prices to return to pre recession prices. There have only been around 2 years of house price growth. And some properties still have not exceeded pre 2008 price levels.

This is a vastly different experience of recession compared to some other areas of the UK which have experienced year in year house price growth.

The current economic global instability will certainly impact housing market confidence and prices.

Fretfulmum

Haven’t you read about the frenzy of people trying to view a house as soon as they come in the market?

Yes its crazy where I live, houses are going for way over what they should be. Thats why I'm thinking they cant just keep going up, something has to give 🤷‍♀️

@Mumof22020 but that means people can afford them at current prices and there are still far more buyers than sellers. Market economics means that something big would have to occur to change this dynamic. That’s either credit becomes unaffordable for most or banks restrict lending. Either scenario will not make it any easier for those struggling to buy houses currently, it will just make it worse and the only people who would benefit are the cash rich

They won't fall. So many MPs are landlords that they'll inevitably come up with some wizard wheeze to prop prices up artificially. They've been doing it since at least the mid 1990s, I've long since stopped dreaming of houses and even flats being priced sensibly for anyone on an average wage with no obliging bank of mummy and daddy to provide a deposit.

I can't see house prices dropping in my lifetime now unless there is a sudden massive drop in population.

House prices are not going to drop. They aren't driven by wages and haven't been for a long time. Wages have been stagnant in the UK since 2008 and houses are way more expensive now than they were then.

People are still living in houses ofc. So there are plenty of houses. This isn't a supply issue. But now increasingly people don't always own the house they live in. We're moving back to being a rentier economy and house prices in a rentier economy have little to do with wages. It's more about investment ie is property somewhere that monied people want to park their money? For ages the answer has been yes, due to low interest rates and banks printing money. That's still the case plus the stock market is fucked by Brexit and now war in Europe. So property is still an attractive investment. And post pandemic those who had money before it now have even more. And they want to buy houses.

I went through the early 90s negative equity thing - & I had to sell because in a perfect storm my relationship broke up & DP stopped paying the mortgage. I had to beg and borrow money to sell the thing.

But that aside , I think a lot of people buy a house to just live in and if they don' t have to sell they will just weather the fluctuations in price and sit tight - so fewer properties for sale.

I would not expect a massive downturn, you could be waiting a while , just budget for what you can afford and as long as it gives you a fair time of happy living then I would go for it. That said - there may be the odd bargain because people absolutely have to sell , but I would not (if it were me ) be expecting a massive wholesale drop in prices - because many just will not sell if their house goes below e.g. the mortgage or a certain level.

It's hard - my DS cannot even think of buying a flat etc at the moment & I have looked down the back of the sofa and sadly the 53 pence I found isn't going to cut it. The Bank of M&D has come up short.

I really think prices will fall at the moment, due to lack of stock, the prices are remaining high.

Gov have been propping up the market, with SDLT holiday, exceptionally low interest rates.

But Gov can’t beat the market with a world wide recession looming. High inflation, and possibly, although I hope not hyper inflation. Those that remember Black Monday, will know exactly what I mean. You can’t beat the market.

What with the debt of Covid, now Russia etc. Another SDLT freeze would be impossible, Gov will need this revenue. I have been saying for a while now about industry property blogs that have been rewritten predicting a fall. It really surprises me that people don’t think that it’s possible for the market to crash. When this has been the pattern over the years.

Perhaps I shouldn’t be surprised, I posted on MN about the supply shortages and rising cost of building supplies in May last year. Many posters disagreed, I wasn’t making it up, I had read about it industry blogs. Been proved correct on that. That being said I really don’t want to see a crash, I saw the misery people went through in the early 1990’s repossessions, stuck in negative equity etc. It was awful.

@Mumof22020

Fretfulmum

Haven’t you read about the frenzy of people trying to view a house as soon as they come in the market?

Yes its crazy where I live, houses are going for way over what they should be. Thats why I'm thinking they cant just keep going up, something has to give 🤷‍♀️

It can change really quickly, it definitely did in 1973 with an absolute frenzy to buy turning into prices dropping in a matter of weeks. It is like runs on banks, once people start questioning the bubble it stalls. I'm not saying it will happen, I'm not psychic and I know it unlike many on here, but could it happen? Yes of course it could. Will it happen? No one knows.

Having starting buying and selling in the 80s there are always dips but overall prices go up. My two bed flat I sold gif just over £100k back then, with the agent saying I was really lucky as they'd never sell that high again.... sure enough they are about £750k now.
So I think things might slow, maybe not do much if a frantic over asking price situation, but not a big drop.

There will be a Short dip, but not enough to make a real difference. Then prices will stagnate for a while. That will be all.

Some areas will see people fall into negative equity, but those won’t be the ‘desirable’ ones and if the owners can ride it out, they will be fine.

I absolutely support not buying Russian gas, but the reality is it's going to hit us hard as a country and property prices are batshit at the moment. I think post-Covid, quite a lot of people had a nice bit of money they didn't expect, so they've gone out and spent it, which has covered up some of the problems in the economy. It's the same with the post Covid housing market. Everyone I know who wanted to move post Covid now has, so I think a reality check is coming fast.

Yes, we'll be in recession soon and inflation is continuing to rise. The housing market will either flatten off which will be a reduction in price in real terms (compared to rate of inflation) or could drop significantly depending on what happens with the UK/ worldwide economy. The outlook for the economy looks very poor. The government/ B of E won't be able to use QE extensively because of the rate of inflation nor can they lower interest rates as they are already extremely low.