Thursday , November 30 2023

UK Property Could crash in 2022 by 45% warns the British Landlords Association

The UK could see the most significant property crash in living history and the developed world economies experiencing something like the great depression of the 1920s.

If someone said you can expect property prices to collapse by 50% by next year, many would say that’s not that possible.

Let’s revisit the property crash of the early 1990s; property prices in some area’s crashed by 50%. So, a price drop of 50% is not shocking nor unfamiliar territory. As a point of reference, let’s have a look at Crawley West Sussex.

A town with a bustling international airport (Gatwick) and a large industrial estate. A thriving city with an exceptionally low unemployment rate. 

When the collapse came in the early 1990’s property prices dropped by 50% in Crawley. I have given Crawley a reference because the purpose is to demonstrate that some area’s property prices took a big hit.  

It’s worth looking at the reason too. It was a triple whammy!

  1. The interest rates in one day went up from about 7.2% to 14.8%. For those who had a mortgage, suddenly, their mortgage repayments doubled.
  2. Just like COVID-19 and London now, those who worked in Crawley at that time just came to Crawley to work. Many came from Liverpool, Manchester, Sheffield etc.

When the recession hit and job losses mounted, this workforce returned home to their family and friends.

If they had to claim unemployment, they might as well do it back home in their own town. How does this matter to the property prices?

Landlords at the time were struggling to find tenants to rent their properties. So many had empty properties unable to rent.

With the above numbers 1 and 2, the 3rd one is they saw the property prices crumble at the start of this article.

The situation now is much worse than in the early 1990s. 

The only medication the central banks have is pumping more and more money into the economy. There are no more levers to pull other than printing more money. 

Interest rates are historically low, so lowering interest rates to stimulate the economy is all but exhausted. 

These are just a few of the stimulus ideas the UK government has used:

Direct and Indirect – Tax measures

e.g., payment deferrals and rate reductions.

Employment-related measures

e.g., state compensation schemes and training

Available online measures to support people employed by corporations.

Job Retention Scheme (applies in England, Northern Ireland, Scotland, and Wales).

Kickstart Scheme applies to all of the UK apart from Norther Ireland.

Apprentice Scheme (applies in England only)

Traineeship Scheme (applies in England only)

Statutory Sick Pay (SSP) refunds for smaller businesses

that support people employed by corporations.

Relaxation of annual leave rules

Loans and moratorium on debt repayments

Covid-19 Business Interruption Loan Scheme for smaller businesses for Businesses with turnover of up to £45m.

Coronavirus Large Business Interruption Loan Scheme which is for Businesses with turnover of more than £45m.

COVID-19 Corporate Finance Facility 

£750m coronavirus fund for frontline charities

Financial Support for SME’s which focused on research and development.

Future Fund for high-growth companies

Bounce Back loan scheme for small businesses

Pay as you grow.


Green Stimulus

Self-Employment Income Support Scheme

Self-Employed Income Support Scheme

Culture and Arts

Local Restrictions Support Grant

How will COVID-19 affect the house prices?

Banks are now charging for us to keep money in the bank. So, we are urged to spend or invest in things like property or a small business venture. 

This only makes the problem worse, and when the fall does come, it will be even more devasting. In my opinion, at times, the government can intervene to take the edge of the economy when it is too hot or cold. 

But to put it on steroids 24/7 and with an additional cocktail of drugs is a disaster. They should have let the economy find its own level. If you want to read the extensive list of government measures, read the article from KPMG. Some financial stimulus measures were needed; otherwise, our economy would have collapsed, but to act in a knee jerk reaction is unhelpful.

We have been told our banks are stress tested and are in good shape. The stress test at what levels and at what percentage defaults?  

If this article seems like scaremongering, concentrate on what the world bank said before covid on the UK property prices. They reported the UK property prices were 50% overvalued. 

The report from housing evidence report revealed London property prices jumped up 50% in just 4 years. Since 1996, UK property prices have increased in real terms by 160%. These figures are pre-covid-19, and the negative impact of Coronavirus on the housing market are not factored in.

It is essential to note some European countries have already seen before COVID-19 property prices collapse by 50%. 

In its latest House Price Index, Halifax revealed that UK house prices are continuing to rise, breaking every record going. 

The latest rate of annual house price growth stands at a staggering 9.5%. This is the highest in seven years, with the average UK house price now standing at £261,743. The UK housing market has defied all expectations.

There is little doubt amongst the experts that a property price crash is coming. It’s not a matter of if; it’s a matter when?

The British Landlords Association prediction is the UK property market will take a fall in simmer of 2022.

The 18-year property cycle theory

The visionary author and economist Fred Harrison has been very vocal about a pending property crash.

Harrison has very successfully predicted the property market crashes of the early 1990 and 2008. His research has drawn conclusions from data collated from the past 300 years.

Harrison took as his business trend analysis from the 1930s Chicago model. He tested his model against economic events in Australia and Japan.

He then applied it to the housing market in the UK, which has resulted in a reasonably accurate prediction of the market crashes that have come to pass. Harrison’s latest forecast is that UK house prices will crash in 2026. This is followed by a severe economic depression than the financial crisis of 2008.

Will house prices rise further in 2022?

During the Covid-19 Pandemic, most people are talking about when the property will crash. It’s not a matter of if; it’s a matter of when. 

Not many predict the property prices will climb in 2022. 

It is accepted that buyers are looking to make lifestyle changes due to the COVID-19 Pandemic. People want to spend more time working from home. This allows companies to cut costs by giving up leases for office space. This is one of the main reasons people are looking for suitable property due to lifestyle changes. 

There is severe concern unemployment will rise as the furlough scheme ends. However, economists are pinning their hopes on a strong recovery in Q3 and Q4 of 2021, which will soften any pending recession.

To buy now or not to buy?

If you are considering buying a new home, you may be pondering on should buy a property this year or wait until prices drop.

This is a difficult question; each situation is different. If you pick up a bargain and intend to keep the property long-term as your home. 

The falls and rise of the property price may not affect you that much. However, as an investor, you really need to consider the situation very carefully. 

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