Landlord Knowledge - Home of the Savvy Buy to Let Property Investor

Significant House Price Drop Needed to Realign with Pre-COVID Levels

New research from the property acquisition experts at House Buyer Bureau has shown that, contrary to the perception of a slowing market, UK house prices would need to drop by a striking 19.3% to return to pre-pandemic norms. This is notably more pronounced than the 12.9% drop observed during the 2008/09 global financial crisis.

House Buyer Bureau has scrutinised current UK house prices, juxtaposing them with rates from the outset of the COVID-19 pandemic, calculating how significantly present values would need to dip to realign with those before the unexpected market surge during the pandemic. This investigation further juxtaposed its findings with market behaviour amidst the 2008 global financial crisis.

Despite current market speculation suggesting a declining trend in housing prices, the metrics indicate that the average house price, currently at £287,546, would need a dramatic decrease of 19.3% to revert to its earlier level of £231,940 from January 2020.

It’s evident that, in spite of some apprehensions about the market’s performance, any minor price decreases are essentially inconsequential, given the significant surge during the pandemic, which was likely amplified by the Stamp Duty holiday.

The projected decrease of 19.3% overshadows the sharp declines observed during the recession induced by the 2008/09 financial crisis. At the onset of the recession in April 2008, the average UK house price stood at £183,148. This dropped by 12.9% to £159,561 just 14 months later.

To get present house prices back to their pre-pandemic levels, the fall would have to be considerably more drastic than that experienced during the 2008 global financial crisis, an economic downturn that many regard as more acute than our present challenges.

Chris Hodgkinson, Managing Director of House Buyer Bureau, had this to say:

“Many so-called property experts have been quick to prophesize 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.

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.

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.”