The UK property market is obviously taking account of Brexit and political uncertainty at this moment in time. While there have been some reductions in house price growth in some areas of the UK, in general UK house price growth over the last 12 months is still in positive territory. However, reading the popular press over the last few days you might have thought otherwise!
Scaremongering to the extreme
There was an article in the Express newspaper this week with the headline “Property crash: A THIRD of UK properties for sale drop in price by £25,000”. The insinuation was that the UK property market is “crashing” with more than 30% of listed properties seeing a reduction in their list price. The problem is that a £25,000 price reduction does grab your attention but what is the underlying house price in question?
For a £1 million house, a £25,000 reduction is just 2.5% and for a £2 million house the reduction is just 1.25%. However, a 2.5% drop in the list price for UK houses does not grab the same attention with readers as a £25,000 loss in the pocket.
Blowing the froth off the market
All of the areas mentioned in the Express article, impacted by the “crash” in property prices, are located in and around the London area. This is an area of the UK property market which has performed exceptionally well over the last decade and a £25,000 reduction in list prices/valuations is neither here nor there in the context of the long-term picture. However, these are the kind of articles which prompt panic and concern, a race to the bottom and encourage buyers to sit on the sidelines waiting for the “inevitable crash”. To all intents and purposes there is a real danger of talking ourselves into a crash.
Slow deflation of UK property market
There is no escaping the fact that Brexit has sent a reality check through the UK property market. The idea that UK property prices would continue to rise indefinitely has been scuppered, there is some concern amongst housebuyers and sellers are now trying to find “the right price”. Some local property markets in the UK have backtracked on their positive performance of the last few years and there is a feeling of a slow deflating of the UK house price bubble. How far prices will fall is unclear at this moment in time but doomsday scenarios would appear to be well short of the mark.
It is also worth pointing out that rental yields will at some point kick in because while demand for UK property may have dropped slightly there is still demand for rental properties. Indeed the drop in demand for property has also been reflected by a drop in properties available for purchase. So, while there is no doubt the UK property market is going through something of a consolidation period the idea that we are on the verge of an “inevitable crash” would appear to scaremongering to the extreme at this moment in time.
The simple fact is, a consolidation period in the UK property market does not make for sensational headlines. When you start talking of good old-fashioned cash in your pocket and losses of £25,000, well, that is a different matter for many people.