UK Housing Market Headed For Crash Experts Warn
The UK housing market could face a crash to rival the one that buckled the economy in the early 1990s, experts have warned.
Despite a 1.1 per cent growth in the housing market during June, experts are concerned that the prospects are less than clement, with some predicting a particularly gloomy future for homeowners.
Professor Paul Cheshire of the London School of Economics, has said: “The current house price ratio is unaffordable. Wages are failing to keep up with inflation and the housing market is overheated.
Markets are cyclical
“I’m not saying house prices on average will fall by 40 per cent, but they could do. Brexit has contributed to an already unpredictable economic environment, who knows what will happen there. It’s more likely that we’ll see a fall in house prices of 25 per cent, which will be very uncomfortable."
His colleague at the LSE, Professor Christian Hilber, agreed that a turn in the fortunes of homeowners was on the horizon.
"Housing markets are cyclical, and the Greater London and South East regions are the best indicators of what will happen though out the nation. Right now it looks increasingly likely that the market will turn.
“Brexit will have a large part to play in the future of the housing market. If the negotiations go well, there won’t be much of a problem, but if it turns sour the markets could see sluggish or even negative growth, which could adversely affect the housing market.”
Echoes of the early 1990s could be cause for alarm. From an average house price high of £70,000 in May 1989, prices plummeted 13 per cent in just six years.
Economic conditions were markedly different in the late 1980s and early 1990s, with the Bank Base Rate rising to a high of 15 per cent.
The result was unaffordable mortgages and for more than a million homeowners an unavoidable slide into negative equity.
Ray Boulger, a mortgage expert, said he doesn't see interest rate rises on the horizon, but a series of increases could prove the catalyst for change in the housing market.
“I doubt we’ll see falls of 40 per cent or so, 25 per cent is more likely, but with unpredictable elements such as Brexit it’s hard to predict where we will be in a couple of years’ time."