Economic conditions in the UK are incredibly challenging at the moment. Inflation is at a 40 year high, wages aren’t keeping pace, and the cost of living crisis continues to worsen. There is also a lot of trouble in the housing market. If you are a landlord and want assurances for your income, we can help. You can work with us to get access to the best guaranteed rent London can offer. You will work with your local council to get an array of benefits.
The Bank of England recently said that they are predicting the UK to enter a recession by the end of the year. There are fears it could last for 15 months or even longer. The expectation is household post tax income will plunge sharply. Ultimately it could be the biggest downturn since the financial crisis in 2007/08.
A recession can have a big impact on people in different ways. One thing to look at is what could happen to house prices. We want to do this here to provide some useful advice for landlords and buyers.
Could prices fall?
The fear among homeowners is that prices could fall when we enter recession. Some buyers may be looking at the situation and hoping that this could happen so it would be cheaper for them to purchase. But will it?
Historically the length and severity of the recession will determine what happens to house prices. If a deep, long term contraction of the economy happens and unemployment rises, values could fall.
However, at the moment the Bank of England is not forecasting this. They are not anticipating a repeat of previous recessions. Instead, the expectation is that house price growth will slow at the end of 22 and continue to cool in 23. This will likely come because mortgages are less affordable and the cost of living increases will eat into demand.
A look at the previous recession
Many experts look at what happened during previous recessions to try to predict what may happen in the next one. They keep an eye out for patterns that could repeat.
There are some important lessons to learn from 07/08. Here there was a big contraction in mortgage availability. Lenders had much less confidence in people being able to keep up with repayments. As a result, it became harder for people to borrow. That physically meant that a lot of people could not buy and had a massive impact on demand.
The impact of mortgages being harder to find plus the big rise in unemployment saw house prices fall. The average loss was 12%.
Should buyers wait?
Uncertain times can cause big problems for buyers. Some may think to wait to see if demand and prices do fall. While there is a chance of a dip, it may not happen. In fact, according to the data in the last 20 years there have only been 31 months of house price falls. These all came in the period from 2008 to 2012. This was both during and in the aftermath of the global financial crisis.
As we said above, the Bank of England does not expect this recession to be as bad. They predict that house price growth will slow, but in most places they expect it to continue to rise slightly. So, waiting may not be the best option.
The wisest thing here is to research. Buyers should begin by making sure their income will be steady or rise in the next few years. Then they should look at what they think is a fair price for the homes they are considering.
Do you want to look at guaranteed rent in London?
If you are a landlord and have any concerns about the recession or cost of living crisis, there are options available for you. One of them is to choose to work with local councils and get guarantees on your rent. They can offer protection against non-payment from tenants and can also stop your properties from being vacant for the long term.
We are one of the most reliable providers of guaranteed rent London has. Clients can trust us to give them access to fantastic schemes with councils across the city. We can even offer support with preparing properties and getting on a scheme.
So, if you have questions or want to start, contact us.
