House price crash ‘now appears unlikely’

A crash in house prices appears to be unlikely this year as the property market is much more buoyant than expected, according to Jonathan Rolande, director of House Buy Fast and a founding member of the National Association of Property Buyers (NAPB).

Rolande said that despite recent price drops, there is not a serious risk of mass negative equity this year.

He told the Which? Money podcast: “Prices would have to drop at least 15% from their peak to see a lot of people in negative equity. However, many will begin to see the price they paid is higher than the current value – an uncomfortable feeling, for sure, but only relevant if you’re actually trying to sell up.

“So far at least, the property market is proving resilient and price reductions have been quite small – a few percent or so. This keeps many out of danger.”

Rolande said there are many factors as to why we should be seeing, and have seen already, drops in the housing market.

“After the Budget back in September, we saw interest rates and particularly long term borrowing rates absolutely rocket,” he explained. “They more or less doubled almost overnight, and 1,000 plus mortgage products were withdrawn from the market altogether.

“The market got an enormous seismic sort of shock at that point. Everyone reacted accordingly, sellers who had to sell had to start reducing prices in order to tempt purchasers and obviously some purchasers took advantage of the situation, rightly or wrongly, and thought, ‘this is my time to re-negotiate the price’.

“Now though, I would say we came back after Christmas to quite a different market – much more buoyant than we would have expected, and we are hopeful that things may well start to improve.”

Rolande said pockets of the country will be more affected by price drops than others, and he expects prices to start to level off this year.

“This isn’t a crash at the moment,” he added. “This is a slowdown and the areas that I would expect to see fall are really the kind of race-for-space areas, and then the holiday home areas.

“So we would expect those to fall a little bit more but city centres Manchester, London, Leeds, those sorts of places where people are now returning to work. There is an appetite to buy property again.

“Those areas will be less affected than more rural and holiday and coastal areas.”

SOURCE:  Property Industry Eye | FEBRUARY 27, 2023 | JEROME SMAIL