The UK’s property market could be set to crash with some experts predicting prices in some areas dropping as low as £70,000! This comes as no surprise to industry regulars with some claiming it was ‘inevitable’ due to the constant political and economical issues the country is currently facing. A number of property experts have come out and expressed their concerns, some of which include:
David Hollingworth, mortgage broker at London & Country who spoke with WhatMortgage, he said:
It definitely feels as though the tide is starting to turn in terms of house price growth &
At the moment there is still a plateauing and there could be some room for some prices to come off a little bit.
Another expert, Jonathan Hopper, managing director of Garrington Property Finders, said:
The drumbeat of a slowing market is getting steadily louder
In addition, Martin Ellis, housing economist at Halifax said:
“House prices have flattened over the past three months. Overall, prices in the three months to June were marginally lower than in the preceding three months.“
It’s clear that these factors alone won’t cause a property meltdown but everything combined may contribute to Britain’s property marketing collapsing.
There are always a few key underlying changes or events that spark a downfall and this situation is no different but which of the issues our country is currently facing could be to blame for the current trend of lowering house prices? Let’s take a look at some of them below:
Yes, Brexit! Ever since Brexit was announced on the 23rd June 2016, the pound has weakened significantly losing 13% of it’s value against the dollar. Although there are other reasons for the pound to have lost value, it is thought that Brexit is the main culprit. The pound weakening means that budgets have been tightened and inflation has picked up but wages have remained static so less people can afford to purchase homes which has been dragging down house valuations. Furthermore, the bank of England governor, Mark Carney has stated, the uncertainty surrounding Brexit & how well Britain will negotiate its exit and future dealings have also had a negative effect on the economy.
Supply, Demand & Affordability
This one may seem odd but let’s look into it a little. Right now, the Demand for homes is prevalent however, the government has been falling short of building the required amount of homes for it’s residents for quite some time now. Your first thought might be that if there are less houses for sale that would mean they should cost more because there is a shortage? Yes & no. There are fewer houses being built & for sale – yes, but fewer people are able to afford them. Demand is backed up by the ability to pay and with increased inflation & declining incomes the demand will soon decrease resulting in lowered house prices.
Mortgages & Interest Rates
Currently mortgages remain stable and affordable which keep prices static and does not put consumers under any added pressure when it comes to taking out a mortgage, however, this could change instantly if the Bank of England decided to raise interest rates. It’s by no means on the agenda as of right now but with rising inflation it is a definite possibility for the future. If the rates do increase it will lead to an increase in mortgage rates which will make it harder & more expensive for homeowners to pay off their mortgages. This in turn may cause house prices to drop further.
It is still unclear how much all of these factors will fully impact the property market as there is still so much uncertainty among consumers and experts alike. As the saying goes, time will tell and we will undoubtedly have a much clearer picture of property industry soon enough.