Will House Prices Stay Resilient During The Recession?
There now seems little doubt that the UK is about to enter into a period of recession. A number of contributory factors, including the war in Ukraine, have meant that an economic downturn is predicted for the next few months, with recovery not expected to take place ahead of summer next year.
Spiralling costs of energy have been accompanied by a surge in interest rates and the UK economy is expected to contract by 2% in 2023 as a result. Little wonder then, that this outlook is causing concern for both those in the property industry and those who hope to sell or buy a new home.
A Prediction Of Falling House Prices
After several successful years for the property market, in which prices rose by approximately 24% [1], it now seems clear that the tide is about to turn. In the previous two and a half years, the rise in house prices may be attributed to a number of factors, including the stamp duty holiday and cheap mortgage offers, both of which are sadly no longer on the table for those looking to buy.
Instead, economic uncertainty compounded by rising rents means that first time buyers will likely struggle to save for a deposit, whilst others will move home only if it is an unavoidable necessity. And, of course, with a reduction in demand comes an inevitable reduction in property prices. Indeed, the experts at Savills’ [2] predict a 10% decline in property values.
Location Matters
As the saying goes, much of the property game centres on “location, location, location”, and this is likely to prove true for the effect of the recession on house prices, too. Whilst areas such as London will be hardest hit by the drop in property values (it’s estimated that this market alone will see a loss of 1.7% over the next five years), other parts of the UK will actually see a substantial increase in the average cost of a house or flat. Areas such as the North West, the North East, Yorkshire, and Humberside are all predicted to see a substantial rise in their property values, with an average net gain of over 11% over the same period. The reason for this stellar performance is due to the lower average cost of property in these areas, which in turn means that a smaller deposit and mortgage is required to buy.
This means that there will certainly be plenty of property stock proving resilient in the face of the recession, which represents good news for those in the industry. For those looking to purchase in one of these areas, it makes sense to consult with an expert such as Sam Conveyancing first.
A Temporary Setback
For those wanting to get ahead of the economic downturn, now is a good time to overpay on help to buy repayment schedules, thereby avoiding paying more in the long run.
The good news for anyone with an interest in the UK property market is that the downturn in house prices is expected to be temporary, with the average price of UK property set to rise by 6% by 2027. Meanwhile, those willing or able to look to the North will see a more resilient market overall.
Resources:
[1]https://www.buyassociation.co.uk/2022/11/09/house-prices-robust-uk/
[2] https://www.savills.co.uk/
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