A handful of Ashford landlords and homeowners have been asking me what might happen if we had another property crash like we did in 2008 -09?
The UK property crash in 2008/9 caused property prices in the UK to drop by an average of 18.37% over a period of 16 months
On the run up to March’s Parliamentary vote on Brexit, a number of people have asked what a no-deal Brexit could do to the property market and if there would be a crash as a result.
I have discussed in a previous article on the chances of that (slim but always a possibility) … but assuming it happens, it is my opinion the outcome of a no-deal Brexit would be no worse than the country’s 2008/9 credit crunch property crash, the late 1988 property crash, the 1974 property crash, 1951 property crash … I could go on. The British economy would bounce back from the shock of a no-deal Brexit with lower property values and a continued low interest rate environment (perhaps with a further round of Quantitative Easing) and that would mean we would see a similar bounce back as savvy buyers saw a fantastic buying opportunity.
So, let me explain the reasons I believe this…
Many said after the Brexit vote in June 2016, we were due a property crash – but we all know what happened afterwards
Initially, let’s see what would happen if we did have a crash, how quickly it would bounce back and then finally discuss how the chances of a crash are actually quite minimal.
Therefore, to start, I have initially split down the types of property in Ashford (Detached/Semi etc.) and in the red column put the average value of that Ashford property type in 2009. Next in the orange column what those average values are today in 2019:
Now, assuming we had a property crash like we did in 2008, when average property values dropped nationally by 18.37%, I applied a similar drop to the current 2019 Ashford figures (i.e. the green column) to see what would happen to property values by the middle 2020 (because the last crash only took 13/14 months).
…and finally, what would subsequently happen to those same property prices if we had a repeat of the 2009 to 2014 property market bounce back:
Of course, these are all just assumptions and we can’t factor in such things as China going pop on all its debt … yet either way, the chance of such a crash coming from internal UK factors alone would seem far slimmer than in any of the four property crashes we have experienced in the last 80 years. Why, you might ask?
The seven reasons I believe are these …
- The new Bank of England mortgage rules on lending 2014 to stop reckless lending that fuelled that last crash.
- Low inflation.
- Low mortgage rates (the average Brit’s fixed rate mortgage is currently 2.26% and the variable rate mortgage of 3.07%).
- Wage rises are forecast to continue to outgrow inflation.
- Unemployment figures dropping to 4% (down from 8.4% in 2011).
- The high percentage (67.7%) of all British mortgages being on a fixed rate.
- And notwithstanding the distractions of Brexit over the last few years, it cannot be denied that the British economy has slowly and steadily been heading in the right direction for a number of years, built on some decent foundations of a steady housing market (unlike the 1988 and 2008 crashes when the housing market got overheated very quickly on the run up to the crashes).
So as the circumstances are much different to the last two crashes, the chances of a crash are much slimmer. Yet if we do have a crash, for the very same 7 reasons above why the chances of a crash are unlikely, those 7 reasons would doubtless contribute to making the ensuing slump neither too long nor substantial in scale.
One final thought for the homeowners of Ashford. Most people when they move home, move up market, meaning in a decreasing market you will actually be the winner, as a 10% drop on your current home would be much smaller in £notes than a 10% drop on that bigger property … think about it!
One final thought for new and existing buy to let landlords of Ashford. Well, the questions I seem to be asked on an almost daily basis by landlords are: –
• “Should I sell my property in Ashford?”
• “Is the time right to buy another buy to let property in Ashford and if not Ashford, where?”
• “Are there any property bargains out there in Ashford to be had?”
Many of our Ashford landlords and some others who are with other Ashford agents, like to pop in for a coffee, pick up the phone or email us to discuss the Ashford property market, how Ashford compares with its closest neighbours (Folkestone, Canterbury and Maidstone), and hopefully answer the three questions above. I don’t bite, and don’t do hard sell – I’ll just give you my honest, straight-talking opinion. I look forward to hearing from you.