Housing Market Bounces Back
This is the year that we will all like to forget sooner rather than later. We are now in the worst recession in history and compared to the last recession of 11/12years ago, this one has been brought on by something none of us could ever have predicted.
Comparing now to the recession of 2008/2009, we’re taking a look at how the housing market is coping and if we can predict how it will turn out based on the experiences of the last one.
Currently, we have seen that the housing market has endured a real kick in the teeth, which we seem to be slowly recovering from. It was a rather different story back in 2009 when the slump lasted much longer. The reasons for this could be down to many varying factors, such as –
– With more properties going up for sale and more sales going through now compared to the last decade, it’s given consumers more confidence to purchase.
– Interest rates are considerably lower
– Lending is more available
The concerning factor, however, is if the recovery will continue given that so many people have been made unemployed and are continuing to be made unemployed.
To try and understand the current climate a little better, we will look at some of the main attributes of the previous recession, where the house prices crashed, and compare with the current view we see today.
Property prices can be influenced by many different reasons, the key one being supply and demand. If the demand is greater than the supply, vendors are in a fortunate position where they can request more for their property. If there is an excess in supply, then there can be more room for negotiation in the price, which falls in favour of the buyer.
Supply and demand can see-saw due to things we’ve already mentioned; consumer confidence, interest rates, lending availability, etc. Landlords can also be encouraged or discouraged to buy properties to rent based on the current yield they may achieve through buy-to-let.
Sadly, recessions with higher unemployment decreases demand for properties and increases repossessions.
The recession that was seen across the world in 2008 and 2009 was brought on by several
weaknesses within the economy but was initially kicked off with the housing crash in the United States four years earlier.
The first quarter where the UK economy saw a reduction in GDP (Gross Domestic Product – a measure of the size and health of a country’s economy over a period of time – usually one quarter or one year) was in Q2 2008, followed by the next 4 quarters.
By Q3 2019 the UK was officially out of the recession.
With so many weaknesses in the UK’s economy, it was only a matter of time before the housing price crash, which then followed a huge fall in the availability of mortgages to the general public. Consumer confidence was the lowest it ever had been when the house prices slumped by just over 16% in 2008.
Then followed the lowering of interest rates in the second quarter of 2009 to help the country recover from the recession. This made it cheaper to borrow money and made mortgages more affordable, encouraging people to start selling and buying once more.
The number of house sales by the third quarter of the year 2008 were almost half compared to the previous year, and it took another 12 months for sales to start picking up again, mainly due to the interest rates dropping.
It shouldn’t have come as a surprise to anyone when the UK announced we were back in another recession thanks to Covid19. All recessions look different because they are all triggered by something different, so to compare this recession to the last one of 2008/2009 may still not give a clear picture as to how the housing market will pan out.
What we do know, is that the UK’s GDP had shrunk by 20.4% come Q2 2020, which is an economic shift that has never been experienced since the Office for National Statistics records began in Q2 1955. The largest decline the UK economy ever saw prior to Covid19 was -2.7%.
To try and sustain the UK economy and reduce the impact that Coronavirus has caused, the UK interest rates have remained low, even lower than the last recession.
It’s encouraging to see that the buying and selling of properties in the UK is still very high, thanks to the Stamp Duty holiday put in place by the Government. As a result, asking prices have increased by almost 8% and there are currently no signs of this changing; new properties are still coming to market, and agreed sales are showing similar trends as well.
Overall, looking at the statistics from the last recession in comparison to the one we are currently in, the housing marketing is fairing much better than anyone could have hoped for; low-interest rates alongside the Stamp Duty relief has encouraged more sellers and buyers and a phenomenal lift in both supply and demand – it is currently a Buyers AND Sellers’ market!
We hope it continues, and if you are looking to make your next move, get in touch with the Express team!