Blog Post

Is there going to be a property market crash?

Publish Date: 19 October 2022

By Jade Shrubsole

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Further reading

Positive news at last! Stamp duty tax cuts.

October see’s the first property price drop in 15 months

There is growing speculation that the housing market could crash. High interest rates coupled with the cost of living crisis is increasing the uncertainty for the property market. The Pound did fall two weeks ago to a record low against the US Dollar which saw a hike in interest rates from 0.5% to 2.25%. Some mortgage companies pulled deals from the market due to such uncertainty.

So will we see a crash in the near future? The last time the UK entered a prolonged crash was in 2008, property prices crashed and many were left in negative equity. With house prices having risen steeply over the last 6 years and reaching an all time high, there is rising speculation around the pressure this will have on the housing market.

Whilst the housing market may see a correction in values given that there has been a steady increase in value over the past 5 years, in the event a property needed to be sold, the resultant on sale price may well still be above the original price paid when purchased, so this wouldn't then represent a "crash" as the property was not sold for less than it was purchased for.

Post 2008, lenders have been rigorous with checks on buyers and their ability to service debt. Previous stress tests have checked buyer's ability to pay if the market was to come into bumpy times. 

With the higher cost of living, there is bound to be some uncertaintity towards buying a house and the ability to service a mortage. In a recession house prices fall, in 2008 we saw the average house drop by 15%. So with uncertainty in the market, at the moment are auctions a good place to buy? Are we going to see more interest with people turning to buy at auction for possible lower market value deals? It could well be, unlike the private treaty market the auction market is quick to respond with vendors ability to change reserve prices if needed. 

Auctions offer some certainty for sellers and buyers, sellers can see a prompt secure sales to their properties even if the values were to drop before completion. Buyers can see a prompt purchase with completion taking place usually in 28 days after exchange.