There have been mumblings about UK property prices for what seems like an eternity. We all know the the UK is a very expensive place to buy property and we know how difficult it can for first time buyers who have to save up a rather large deposit and then try to get a huge mortgage they can barely afford. But what evidence is there that we are going to have any kind of crash?
Compare the present to that of the last so called crash, in the early nineties. Back then we had much lower prices but interest rates of up to 14-15% at some stages. Imagine that now! In recent years interest rates have stabilised and there is no real reason to think that they are going to go up much more than they currently are. If they did rise another percent or two we would surely see many people lost their homes and many buy-to-let investors would struggle to cover their mortgages without increasing the rent.
Back in the day there was also much higher unemployment. Not many people can afford to pay the mortgage without a job so it was no surprise to see quite a few repossessions among the unemployed. The main losers back then were those who were forced to sell because of financial reasons, break up of the family or other unfortunate circumstances. Most just stayed put and carried on as best they could. Because it was such a difficult time to sell, most didn't bother trying or cut their losses and invested somewhere else.
Today's housing market in the UK is in a good position. There are simply not enough properties to go around. There are less and less people living in each house and if you believe the statistics there may be another 10 million people on the way to the UK over the next 10 or 20 years. As we are already under supplied that is hardly going to push prices down. Another major factor in the UK is the lack of development land. Most new homes are being built in areas that would have previously not been used. Brown field sites, flood risk areas, close to motorways, train lines etc. Large houses with big gardens are being demolished to make way for 15-20 small houses with tiny gardens and minimal parking. There are more and more city developments that are offering no parking at all such is the demand to use up all available land for living space.
Another issue that seems to be overlooked is the fact that property is now seen as a very low risk investment, which was not the case 15 years ago. If we do see a reduction in prices that will no doubt see an increase in buyers and inevitably push prices back up. People want to buy houses and if they can afford to they will.
Take a look at the rest of Europe. There are not many places left to buy a bargain property. The supposed monster crash in Spain has yet to happen and they have massive oversupply in some parts of the country. Italy is still very expensive except in the developing south but even there prices are rising fast. In France land is cheaper but prices are still high. Only in America have we seen prices come down but many of those properties were bought on very low interest rates that have gone up five fold. They also have severe over supply in tourist and investment areas and people are cutting prices to sell as they cannot get a decent rental return. The UK doesn't have that problem and it is unlikely that it ever will.
There are many variables required to cause the 'perfect storm' and bring house prices crashing down but right now it seems that a soft landing is far more likely.
