Is the Property Market set to collapse?

Leading university professors, Paul Cheshire of London School of Economics and David Miles of Imperial College London are forewarning the possibility another property market crash. Professor Paul Cheshire warned The Daily Mail of a 40% plunge similar to that of 1989, where the value of properties dropped into negative equity meaning that the mortgages on them became more than the properties were worth.

Leading university professors, Paul Cheshire of London School of Economics and David Miles of Imperial College London are forewarning the possibility another property market crash. Professor Paul Cheshire warned The Daily Mail of a 40% plunge similar to that of 1989, where the value of properties dropped into negative equity meaning that the mortgages on them became more than the properties were worth.

However, this contradicts Nationwide’s latest House Price Index Report which reveals that house prices have risen by 1.1% in June. Robert Gardener Nationwide’s chief economist explains in the report that “monthly growth rates can be volatile”, but as the annual rate of house price growth has risen by 3.1% which gives a more accurate depiction of change this too “points to modest price gains.”

The current inflation rate is 2.9% whilst pay rises, especially those within the civil service, remain frozen has also negatively impacted the property market. As prospective buyer’s purse strings are being pulled tighter due to the increase in the cost of living inevitability buying has decreased across the board, including purchasing a new home.

Prof Christian Hilber of the LSE also warned: ‘If Brexit leads to a recession and/or sluggish growth for extended periods, then an extended and severe downturn is more likely than a short-lived and mild one.’

Robert Gardener Nationwide’s chief economist elaborated further on the trends of the property market by looking to London’s annual price growth which he revealed was “just 1.2%- the second slowest pace of the 13 UK regions and the weakest pace of growth in the capital since 2012…” As London is the nation’s capital it’s trends set precedent the performance of the rest of the nation. Therefore London’s slow growth has panicked many who fear that this foreshadows what could be another devastating property market crash. Though as the experts are in dispute what will happen remains to be seen.

Written by: Constantia Papageorgiou