House prices fell in July – are we heading for a real estate crash?

  • Marie Claire is supported by her audience. When you purchase through links on our site, we may earn a commission on some of the items you choose to purchase.

  • UK house prices fell 0.1%, marking the first time they have not risen in over a year

    Driven in part by the ‘race for space’ and a trend towards country living, house prices have soared in many parts of the UK since the start of the pandemic. But last month the average house price fell to £293,221, representing a 0.1% month-on-month decline, according to the latest report from Halifax.

    The report also showed that mortgage approvals have fallen for the past five consecutive months, which could also indicate that activity in the housing market is slowing.

    As the Bank of England raised interest rates to a 13-year high of 1.75% last Thursday, there was growing concern that we were heading for a property crash. But what do the experts think?

    Getty Images

    “While I don’t think we will see a real housing market crash, I do think prices will start to come down further as the cost of living crisis deepens and inflation continues to rise” , said Simon Bath, CEO of iPlace global. “With energy prices still expected to rise another 65% in October, people simply won’t be able to pay mortgages on many properties they might have managed before.”

    Bath continued: “The 0.1% drop in average house prices in July doesn’t sound huge, but it’s hugely significant as it’s the first time in over a year that prices haven’t risen. For first-time buyers, the market is extremely daunting at the moment and until prices come down, people would benefit immensely from the reintroduction of something like the Purchase Assistance Scheme. There’s a real lack of support right now, so people are depending on Mom and Dad’s Bank to get on the ladder.

    Properties in the UK have never been so unaffordable. According to the most recent figures from the ONS, the average house sold in England costs 8.7 times the average annual disposable income – the country’s worst affordability ratio since records began in 1999.

    High prices are one of the reasons the current market has been compared to the bubble that led to the crash of 2008.

    But like Bath, David Hannah, group president at Basic tax — does not predict a real estate crash for 2022. “Rising demand, even with rising interest rates, has represented an adequate amount of liquidity [when assets such as properties can be readily bought and sold because of sufficient supply and demand], which is a good sign,” he said. “The crash of 2008 happened because of a sudden loss of liquidity in the international banking market and we are no longer in the same situation. We had the pandemic and substantial government spending because of it, which drove up interest rates.

    Hannah continues: “But the question must be: will the global lending system be able to maintain the liquidity it lost in 2008? And I think the answer is yes. We are certainly not going to see, as some people have predicted, 20%, 30% or 50% declines in housing in the UK.

    Penny D. Jackson