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IS THE PROPERTY CRASH ALMOST HERE?

Halifax House price figures out today (8th May 2018) do not make good reading for home owners. House prices fell a steep 3.1% in April, the biggest fall since 2010.

Are we about to witness a house price collapse, wiping thousands of pounds off our homes? Are thousands of homeowners at risk of  repossession? Is negative equity back to stalk us again?

Well, before you start hyperventilating, remember that the Halifax house price survey is only one of several. It is best to consider at least 3 surveys each month before forming any hard and fast opinion as to what could happen to house prices.

THE FIGURES FROM NATIONWIDE AND THE LAND REGISTRY, IN PARTICULAR, WILL MAKE INTERESTING READING WHEN RELEASED.

If the fall is confirmed there is another reason for caution. One swallow does not make a summer. The figures for one month do not tell the whole story. The steep fall in April was in fact preceded by a healthy 1.6% rise in March.

Looking at the Halifax figures over a longer period, property prices remain in positive territory. Over the 3 months to April, prices were up 2.2% compared to the same period last year. Therefore, prices are in fact still rising on an annual basis.

Another caveat is that the Halifax figures are for the country as a whole. In London, for instance, other reports indicate that prices have fallen a small percentage over the last year.   

Housing activity is on the decline by all accounts – less sales and less lending. There has been talk of a rise in interest rates, but that seems less likely now following signals from the Bank of England.

The many experts out there are as complacent as ever. They talk of a “downturn” or “softening” of the market, but there is no sense of fear, foreboding or even real concern.

However, those observers who subscribe to the theory of the “18 year property cycle” are less calm and relaxed. According  to one interpretation of the 18 year property cycle, there is a property crash roughly every 18 years with a mini crash or “mid-cycle wobble” – a significant fall in prices but not actually a crash – approximately halfway through the 18 year period.

It is arguable that the current 18 year period began in 2010-11 which means we are definitely in the vicinity of the mid-cycle point.

For mainstream property experts, the picture remains relatively rosy. Halifax itself is predicting prices to increase this year by 0 to 3%.

Mainstream commentators do not expect a significant fall in prices unless there is serious unemployment or a sustained rise in interest rates – neither of which is expected.

A big fall in house prices is good news for:

  • First time buyers and
  • Buy to let investors with funds to invest.

If prices fall and the homeowner does not need to move, the impact is not so damaging.

IF INTEREST RATES RISE AND PRICES FALL, THOSE AT MOST RISK WILL BE HOMEOWNERS CURRENTLY STRUGGLING OR ON THE EDGE OF STRUGGLING TO PAY THEIR MORTGAGE. 

Homeowners in that position should prepare for the mid-cycle wobble in case it comes. They should look to:

  • Secure a cheaper mortgage
  • Increase their salary or income
  • Reduce their discretionary spending
  • Grow their rainy day reserves.

Every time there has been a big tumble in house prices in the not too distant past, mainstream experts have been caught off-guard – have got things wrong.

There is no reason to expect them to be right on the next occasion. Prudent home owners should plan on the basis that property prices are set to fall significantly sooner rather than later.

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Dalton Barrett
Rebel Property Coach

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4 replies »

  1. There’s never a truly perfect time to buy is there? We’re starting to view properties at the moment but your post makes me think we should hold fire for a little bit. But then my former flatmate kept saying she wanted to buy in London but was waiting for house prices to fall, this was back in 2013 and prices are only now just beginning to stagnate.

    • You will hear a lot of experts say there never is a right time to buy a property. Personally I think the time to buy is whenever you can afford to do so. Ideally you want to buy as soon as you can to get the benefit of growth.

  2. Whenever the fiscal market plummet then the dominoe effect comes into play. Should the housing market falls, those who are able to will be able get on the ladder. Those who are already on the ladder may look to other markets to re invest in ie oversea market. Every so often the pressure of the housing lid is lifted. This will give the opportunity to the firstimers to buy their very own home.

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