Stagnation is the most likely scenario. There was dip then slow recovery where I lived. It meant the house we bought in 2007 sold in 2019 for what we paid.
This isn't great. When prices started going back up, even though we'd overpaid the mortgage we were competing against people who, over the same period, had large inheritances or had but equity gains in the rest of the country. The area has seen a massive influx of people moving up from London and the home counties.
I laid down the figures for what you needed to be earning on that basis, to buy the stock of housing the local planners were approving, to the local parish council so they could see how it was driving out people who had grown up in the area. You could just about get onto the market but moving up was now the problem.
And this is the problem going forward that people aren't wrapping their heads around, if we face stagnation.
I keep saying it: the top of the market will flag first but land prices mean they can only fall so far. People in the very largest properties will face slow sales and certainly won't gain much if any equity.
The trend, with rising cost of living, will continue for some time for older people who are cash rich to want to downsize. These people, provided they can sell or get a tenant for their current property, will always out compete those who can only buy with a mortgage. Plus there will be a tightening of mortgage approvals. It means that there won't be a negative equity trap, but there will be a trap whereby you can't move up the ladder once you've bought. That means young couples starting families are going to get caught in properties much smaller than previous generations because the middle of the market will have such demands on it - which will keep property prices artificially higher than they should be. This has been made much worst because of years of planning decisions and developer decisions which either went for FTB properties or large executive homes to the neglect of building the mid market properties.
I don't think prices will drop too much at the bottom end of the market either. What will drop will be the affordability. But demand for homes won't drop meaning someone will always buy them. People need somewhere to live. Households are getting smaller whilst the population increases. Again cash is king.
It means that renting will continue to become more common as young people can't enter the market, and it's older generations who will continue to capitalise on this. And increasingly stepping up the ladder will be the preserve of those recieving inheritance.
Something has to break in this - tenant rights need urgent looking at and it seems inevitable that at some point inheritance laws will change as soon as we hit a demographic tipping point which allows politicians to do it.
All in all, it won't be easier if you are under 45 even if the market stagnants or crashes. And an increase in the market is even worse.
The market is broken. No scenario improves the situation.