UK property house crash news

Is the UK Headed for a Property Market Crash from 2023?

A market-analysis report.

With the aftermath of the global financial crisis in 2007 still ringing in our ears, the UK property market could be moving towards another historical crash, experts say.

In 2007, UK prices reached an average of £190,332 and had dropped to £154,417 by February 2009. A staggering fall of more than 18%.

Properties did not peak again until August 2014.

We now find ourselves in another iconic moment in history. Where even those who have never taken a keen interest in the country’s economics have phrases like “Cost of Living Crisis” trending on their social media feeds.

The current state of affairs is rocky, to say the least. And it impacts the property market enormously (and will continue to do so). So, today we’ll address the questions that people want answers to more than anything else.

Are we headed for the biggest property market crash? And what are the experts’ predictions for 2023 onwards?

uk property market crash in 2023
Will the UK property market crash?

Why are House Prices so High, When They Have Apparently Dropped?

This can be a confusing concept at first glance. While property prices are predicted to see the biggest falls over the next couple of years, prices are still extortionately high.

To give you some perspective, the average price of a UK home has trebled since the turn of the century. According to the Nationwide building society, prices have increased by more than 60% over the last ten years alone; though lenders say these rates are continuing to fall at the same time.

The most probable reason for this is simply a supply-and-demand issue. A shortage of housing stock and a high demand for properties. However, low-interest rates are also still a huge factor – the ability to borrow cheaply makes it easy for people to afford mortgages. 

However, the pandemic has also triggered soaring inflation. So, since December 2021, the Bank of England officially increased the base rate from its record-low of 0.1% by eight times. Inflation reached 11.1% in the year to October; and the base rate now sits at 3%. 

This is creating a magnitude of problems for those who want to purchase property, whom we hear from at Luke Capital Group nearly every day.

> Higher mortgage rates
have made it more expensive to purchase a home. As a result, the property market is expected to head for a crash, following more dips in prices.

> But further rate rises are expected to continue for a short period, which will create damage that is hard to reverse in the property industry (because mortgage payments will increase).

> The cost of living crisis, where people are struggling to pay for food, petrol, and energy bills, will slow down the housing market. As a result, first-time buyers will hold off on buying properties – impacting both their future and our industry at large. 

price crash of uk property market

The Decline in House Prices (and why this could burn the market to the ground) 

Aggressive fluctuation when it comes to money is nerve-racking for anyone. However, as the UK property market continues to bounce up-and-down more and more buyers are becoming hesitant before making any investments.

Nationwide building society states that the average house price has increased by around £50,000 since August 2020. However, data across the board now suggests that this growth is slowing and even reversing.

We found the following statements made by the experts during our own in-house research:

The 1.4% drop marks the second monthly drop in 15 months. The monthly fall was also the largest since June 2020, at the height of the Covid pandemic.

All in, it takes the average price of a house in the UK down to £263,788. Despite the drop, this is still around a fifth higher than at the start of the pandemic”.

Halifax, the UK’s largest mortgage provider shows a 0.4% dip in October 2022, reflecting a significant drop from earlier this year; and they have been quoted saying “It would be foolish to rule out significant annual price drops in the coming months”

“It’s not just that rates are now higher, but buyers have had an unsettling shock, which could have a long-lasting impact on their willingness to take the plunge.”

Halifax revealed that despite house price dips, mortgage interest rates had risen to over 6% according to Moneyfacts – which as you might recall, our CEO RYAN LUKE has written about extensively, as well.

This ultimately means that people are paying the greatest portion of their income on mortgage payments in over 33 years – when the inflation rate is running at an all-time high. This, accompanied by the shortage of new homes, is battering every person across every angle of the property market.

It’s helpful to factor in the regional variation here, too.

> House price growth is slowest in London. But prices in the capital are still the highest in the UK, at almost £520,000 (almost double the UK average).

> Wales is growing faster than any other region in the UK. With a growth of more than 15% year-on-year (source: money mentor).

The Office for National Statistics also claims that these figures vary depending on the type of property, too (detached, semi-detached, flats, and new builds fluctuate, respectively). 

uk property and houses in england

So, is there a Crash in Sight? 

Although it seems unlikely at first (due to the supply and demand issue), UK based interest rate has sparked the fear that the market may crash in the future.

The money mentor suggests:

Following the government’s September mini-budget, the Bank of England warned it may increase interest rates for the eighth consecutive time. This led to a host of mortgage providers withdrawing deals and hiking rates, pushing up the cost of mortgages across the board.

Now that the Bank of England has raised the base interest rate to 3% as expected, these effects could be further amplified.

This, in turn, is expected to lessen demand for housing and cause house prices to fall”.

Bear in mind that this is during a time when 86% of adults say that they are concerned about day-to-day living costs in the UK (source: PWC), thus causing a knock-on effect on keeping up with mortgage payments and rent payments.

Unfortunately, for those who do not have the resources, support, or creative strategic know-how – the predictions of the country’s property market could decimate their livelihoods. 

uk houses and property in england

Can We Convert the Uncertainty, with Luke Capital Group? 

While a vast number of critics argue that Luke Capital Group’s property business models are negatively impacting an already suffering property market (where there is a shortage of homes for tenants) – we prove that our solutions for landlords address a number of hugely concerning issues. 

As the cost of living crisis continues to tie people’s hands until they’re unable to reach their pockets, more and more landlords are landing themselves into debt and financial strain because they cannot afford to keep up with their own mortgage payments and maintenance costs.

Even during a time when the economy is suffering and mortgage rates have hiked more than ever before, there is still the possibility of property landlords being able to live comfortable lives, if they partner with our team.

If you are a property landlord and struggling to see the light at the end of the tunnel, Luke Capital Group offers two property management solutions that guarantee rent or increased rental income. 

You can find out more about Rent Guarantee and Short-Term Rental Management solutions so that you do not need to fall victim, when and if the roof falls down onto the market and drains you of your livelihood. Remember, while statistical insights are brilliant for giving you a deeper understanding of the industry – our industry is the most flexible to work around creative strategies, and there is still a legacy to be made with property – if you partner with the right professionals.