House prices need to plummet by 19.3% to reach pre-pandemic levels

House prices need to plummet by 19.3% to reach pre-pandemic levels

0:03 AM, 31st August 2023, About 11 months ago 1

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British house prices would need to plummet by a staggering 19.3% to reach their pre-pandemic levels as fears rise over a cooling market, research suggests.

The findings from property purchasing specialist, House Buyer Bureau, show this decline is more substantial than the -12.9% contraction seen during the global financial crisis of 2008/09.

It says that while house prices are cooling, they will not crash.

The firm’s data shows the current average house price of £287,546 would need to fall by 19.3% to return to its pre-pandemic value of £231,940 in January 2020.

Part of the rapid rise, the firm says, is down to the Stamp Duty holiday in lockdown.

‘Mutterings of a market crash’

The firm’s managing director, Chris Hodgkinson, said: “Many so-called property experts have been quick to prophesise the demise of the UK property market with fear mongering mutterings of a market crash.

“This simply hasn’t been the case and house prices would need to fall by nearly 20% just to return to their pre-pandemic norm, let alone for the market to crash.”

He adds: “The housing market is standing strong, and this is great news, however, our previous research found that the average buyer now needs almost nine times their annual income to cover the average cost of a home.

“When you combine this huge affordability barrier with a cautious buyer mindset following a string of interest rate hikes, the challenge today is the ability to find a genuine buyer in a proceedable position, not the price they are willing to pay when you do.”

The price drop would need to be more substantial

To compare, the firm says that the price drop would need to be more substantial than that seen in the 2008/09 global financial crisis when average UK house prices were £183,148.

Within 14 months, when the recession ended in the second quarter of 2009, prices had fallen by -12.9% to an average of £159,561.

And the House Buyer Bureau says we need a more profound period of economic turmoil compared to the existing circumstances.

Mr Hodgkinson said: “With property values showing little sign of reducing, this issue is one that is likely to persist and so sellers need to approach with pragmatism and avoid overvaluing, while buyers must be prepared to negotiate tenaciously to ensure they don’t overstretch financially.”

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10:08 AM, 31st August 2023, About 11 months ago

I think prices will fall by more than 20% over the next 12 - 18 months.

At present, properties are not selling (just look at RightMove). Fewer are being offered for sale and sellers haven’t reached a state of panic, yet. If interest rates remain at or around current levels, it’s only a matter of time before sellers are forced to reduce prices in order to attract buyers.

Does the 19.3% figure take account of inflation? I guess not. Normally, this is only a minor discrepancy but with inflation high and out of control, it really does need to be factored in to any news story about housing costs. Only those with a vested interest in keeping prices high will ignore inflation.

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