Will UK House Prices Fall?

Will UK House Prices Fall?

Whether you are a property investor, or simply looking to buy or sell your own home, there’s one question that’s probably on your mind. Will UK house prices fall?

It’s the holy grail of questions and, if you are looking to buy a new home, you’ll be hoping the answer is a firm yes. However, most investors and homeowners will be hoping for an increase in the value of their properties.

So, what’s the answer? Will UK property prices rise or fall in the coming months and years? While we cannot say for sure, there are a number of clues out there.

Reasons Why UK Property Prices May Fall:

The UK property market is closely linked to the economic performance of the country. When things are going well, the property market tends to rise rapidly. But, when we hit hard times, such as the financial crisis of 2008, property prices often plummet.

Here are some of the main issues that could lead to UK house prices falling:

  • The dramatic increase in value over the past few decades cannot be sustained
  • Brexit is causing uncertainty in the market, causing demand to drop
  • Net immigration has been falling, reducing the demand for properties
  • Tighter mortgage controls have made it harder for buyers to get finance
  • Interest rates are rising, putting an end to cheap borrowing
  • Too many people are now ‘priced-out’ of the market

So, in short, a combination of political factors such as Brexit, and economic factors such as mortgage interest rates, could lead to UK property prices falling.

Add into this the fact the market has seen almost unstoppable growth since the 1980’s (a house bought for £100k in 1980 would now be worth around £1m, based on UK averages) and it’s clear to see why some people believe UK property prices will fall.

In fact, Lucian Cook, head of residential research at upmarket estate agent Savills, said: “Uncertainty over what Brexit means for the UK economy and how it will impact household finances will increasingly act as a drag on house prices.

“There is capacity for growth once we have greater clarity, but this will be constrained by rate rises and the corresponding ability to get mortgage debt, particularly in London and other higher-value locations.”

Reasons Why UK Property Prices May Rise:

On the other hand, over the longer term, UK house values tend to rise. Sure, there are occasional crashes, but with the most recent dip happening during the 2008 financial crisis, are we really ready for another crash already?

Here are some of the main reasons why UK house prices could keep increasing:

  • We live on an island, space will always be at a premium
  • The UK population is projected to increase by 3.6 million (5.5%) over the next 10 years (source)
  • There’s a housing shortage that the Government are struggling to resolve
  • The completion of Brexit will restore confidence to the market
  • Government incentives ensure the property market keeps growing

Again, both political and economic factors could have an impact UK property prices, this time with the effect of helping them rise. Government incentives such as the Help to Buy scheme and the changes to Stamp Duty could help drive more buyers into the market and push up property values.

This could combine with the fact that as an island nation with an ever-increasing population, we find it incredibly difficult to build enough homes for everyone. The current housing shortage doesn’t look like being solved anytime soon which will mean prices keep going up.

In fact, property portal Rightmove are predicting that house prices could rise by 1% during 2018 (source). It may only be a small increase, but it’s an increase nonetheless.

UK House Price Prediction

Will UK House Prices Fall? Our Prediction

With so much political and economic uncertainty around, it’s very difficult to answer the question “will UK house prices fall?”.

In the short-term, there is certainly some evidence that a fall in property prices could be coming. However, if it does happen, it’s unlikely to be a major crash. Some areas will fare better than others, but even the worst hit areas are only likely to see single-digit decreases.

If we look at the long-term, the question should probably be “will UK house prices rise?” given, historically, house prices have always gone in a generally upward trend. We see no evidence of why this shouldn’t continue and expect UK house prices to rise significantly over the next 5-10 years.

What Does This Mean For Investors?

If you are an investor we would suggest either holding what you have or perhaps even taking advantage of the calmer waters and making new purchases. Unless you need the cash or intend on selling in the next 12-18 months, there shouldn’t be a rush to sell.

What Does This Mean For Sellers?

If you plan on selling in the near future, we would suggest doing this sooner rather than later as, at best, property prices look like remaining fairly static throughout 2018. Online estate agents can help you get your property on the market quickly.

If you are not looking to sell for a few years then all you need to do is wait it out. But, don’t expect your property value to grow much for a few years.

What Does This Mean For Buyers?

If you are looking at buying property in the near future, our advice is to take your time. The market doesn’t look like it will grow quickly for some time. This means you have the rare luxury of being able to bide your time until you find your dream property without the added pressure of rising prices.

When you are ready to make an offer, the static market conditions may even help you negotiate a lower price for your dream home.

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