The recent survey conducted by YouGov for property marketplace TheHouseShop – which removed ‘don’t knows’ from the final result – asked people to say if, and when, they thought the UK housing market would experience a crash, and provided a range of timescales for respondents to choose from.
The latest house price index from Halifax has revealed that the average house price in the UK dropped slightly between November 2017 and February 2018, falling from £226,408 to £224,564.
One specialist lender claimed that if the timescale was long enough, a housing market crash would be a “self-fulfilling prophecy”.
Could we see a housing crash within the next five years?
Gareth Belsham, director at Naismiths, said that the fundamentals of Britain’s property market indicated that the odds were heavily stacked against another crash on the scale of the one seen a decade ago.
“As [recent] official data from the ONS showed, on a national level the trend for house prices remains resolutely upward.
“The one exception is the prime London market, where years of price inflation – coupled with a glut of supply and faltering demand – have triggered a painful correction.
“But looking ahead, two tectonic forces are likely to combine to keep prices steady at best, and stagnant at worst.
“The first is the dream of home ownership, which still inspires thousands of would-be buyers to take the plunge every year, and the second is the death of supply, not just for first-time buyers but at all price points.
“Successive governments have been unable to solve the supply issue, and despite the best efforts of Britain’s developers, not nearly enough new homes are being built.”
Brian Rubins, executive chairman at Alternative Bridging Corporation, believed that the housing market was historically cyclical and, therefore, if the timescale was long enough, a crash would be a self-fulfilling prophecy.
“The last crash was 2008 – 10 years ago – and in many regions that reduction has only just been corrected.
“Affordability and availability of credit are the two drivers of both price increases and activity.
“Currently, the market is stretched as to affordability and moribund due to a shortage of stock.
“In the wider market, particularly outside of London, prices are being sustained, and in some instances increased, due to the shortage of stock.
“New home construction, particularly family houses, is not sufficient to influence supply and it is probable that this market will remain stable for the foreseeable future, but not for ever.”
Theo Backhouse, founder of independent housebuilder Backhouse, said that he didn’t expect a general house price crash, but thought that there were certain areas to watch.
“In particular, markets where prices have increased significantly on the back of inflows of capital from investors who have benefited from quantitative easing and low rates.
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“These are largely prime areas where buyers can be thought of partly as homebuyers and partly as allocators of capital.
“The prime London market is one of these areas and prices there have already been soft for some time.”
A crash or correction?
“We know from the past that the UK property market is cyclical and while there has been a change in sentiment on the back of slowing demand, this feels more like a potential correction than a crash,” added Paul Turton, head of sales – development finance at United Trust Bank.
“Affordability is a key driver of house prices and sales activity.
“If interest rate increases are small and incremental, this should allow borrowers to adjust their budgets over the following months and years and absorb the financial impact.
“Furthermore, we must also remember that the UK continues to experience strong population growth in a domestic housing market that is structurally undersupplied in many of our towns and cities.
“The Help to Buy equity loan scheme remains another key component of the housing market where the UK government has committed its support until 2021.”
Stuart Law, chief executive at Assetz Capital, said that currently there were no tell-tale signs of what could cause a crash of the housing market.
“What we may see happening is more of a correction than a complete crash.
“Across the UK, [house] prices are still rising strongly, and affordability is far less stretched, so the lack of confidence in the housing market is predominantly London-centric.
“The city’s issues are numerous, so this is where we may expect to see the strongest correction: buy-to-let investors are increasingly selling up due to London rents not supporting the new mortgage interest taxes.
“Adding to this are the high levels of stamp-duty, and [the] fact that gains from house price increases are no longer assumed.”
Bola Ranson, investor and founder of commercial retail property estate agency Ranson, said that the underlying property problem in the UK remained the same.
“There just aren't enough affordable homes being built.
“Well priced homes are still seeing good levels of interest and activity.
“Government measures have really hit the demand for properties hard.
“The recent removal of tax benefits for landlords holding properties in their personal name has led to a number of investors thinking twice about their next property purchase.
“Additionally, the government’s stamp duty surcharge on landlords owning more than one home has deterred some landlords from expanding their portfolios.”
Martin Gilsenan, director of sales at Iron Bridge Finance, added: “Prices are under pressure, and there’s no sign of an imminent recovery, so there is a lack of confidence, particularly among existing homeowners.
“If this leads to a correction in the regions instead of a crash, then funders and developers alike should be able to live with that.
“Our experience is that good developers don’t need to ride the crest of a wave and good lending should not be dependent on a rising market.”