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What does the recession mean for UK house prices?
House prices have been dropping steadily since the start of the pandemic, but with the country now falling into a recession, house prices are expected to continue dropping more significantly, with some experts predicting as much as a 22% drop.
With the coronavirus pandemic plaguing the world for the last several months, the UK has officially gone into recession as the economy crashed and the GDP reduced by 20.4% between April-June – the largest recession since records started. This, along with the record levels of unemployment, has the whole country worried, but homeowners have another question in their minds. What does the recession mean for their house value? We Buy Any House look into the facts and how homeowners will be affected by this recession.
A recession is defined as a decrease in economic activity for two quarters - or six months. With the coronavirus pandemic taking the world over and shutting entire countries down for months at a time, a recession was somewhat expected. Homeowners especially panic when there is mention of a recession, as previous recessions have been catastrophic to house prices. In the Great Recession, house prices dropped by almost 20%, so homeowners have every right to be worried as we go into another recession.
Will my house value drop?
Since the start of the lockdown in March, we’ve seen decrease in house prices through April and May. Before the recession was announced, house prices were decreasing, and experts were sure that this drop would continue into 2021. With the recession on top of this, house prices are due to drop further. This could be devastating news for homeowners who were looking to sell their houses in the next year or so, as their value will be dramatically lower than previously expected. The Resolution Foundation has predicted that house prices will decrease by a huge 22% over the next year, which would be a terrifying drop for any homeowner, but especially those with equity in their property that they’re looking to unlock in the coming months.
Why will my house value drop so much?
With almost 3 million people unemployed across the country, this means a lower income in households. With a lower income, people don’t look to buy a house as they cannot afford it. With fewer people buying houses, more sellers will panic and take their properties off the market, leading to a reduction in both the buyers’ and sellers’ market. With this pattern continuing, house prices fall lower and lower.
Buying a house is one of the biggest investments that you can make, so the decrease in value is causing panic across the board. Homeowners who were looking to sell in the coming months are having to make a big decision; bring their plans forward and sell now, or wait for the recession to end and for the economy to start growing again. Both options have their risks, but with no one able to say when house prices will get to where they were at the start of the year, homeowners are leaning towards selling sooner rather than later to avoid the extreme hits expected in the coming months.
What else is affected by a recession?
It isn’t just the property sector that is affected by this recession. Unemployment typically rises, and workers who were expecting promotions or pay increases in the next 6 months may find that this is now put on hold until the economy is in a stronger position. Those graduating university, or leaving school and looking for work, tend to find it harder as the job market shrinks. Pair that with the number of businesses that were forced to shut their doors at the start of the lockdown and did not manage to reopen them this past month, and that this recession is expected to be the worst the world has seen since the Great Depression in the 1930s.
According to the Bank of England, the UK recession is expected to be less drastic than first predicted. However, this could still be a difficult time for millions of people across the country. For homeowners, the worry is not only in the expected drop in house prices but in the risk of losing their job and struggling to pay the mortgage. At this point, these homeowners need to know what their options are. That’s where we come in – we can provide help and advice for homeowners dealing with financial difficulties, and those who might be under the threat of repossession. Some homeowners can ride out the uncertain times ahead of us, but for those who are looking to sell quickly can come to We Buy Any House and see how we can help.