UK recession and property prices

Simon Misiewicz

Expat & Property Tax Specialist

5th July 2022

UK recession and property prices

How will the recession impact the UK housing market?

Will property prices go up or down when there is an economic recession?

Landlords need to know if property prices are going up or down and if the UK housing market is going to crash.

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What are the basics of UK recession and property prices?

As property accountants serving thousands of UK landlords that purchase buy-to-let properties, we know that many investors are concerned about how property prices will be affected in the UK during 2022.

If the UK slips into a recession, it will impact property prices.

A slowdown usually follows a recession in house prices.

The global financial crisis sparked the UK’s 2008 recession. It led to mass unemployment and a 20% drop in property prices.

There is growing speculation that the UK housing market could crash in the second half of 2022.

According to Rightmove, UK house prices have increased by more than £55,500 on average since the Covid-19 pandemic.

High-interest rates combined with the cost of living crisis have seen UK households hit as they deal with rising fuel and energy costs.

The Bank of England has predicted that inflation in the UK will reach 10% by the end of 2022.

This has left many UK landlords and investors worried about property prices going down significantly or property prices going up exponentially.

Some property investors are concerned that the UK housing market will crash because of the recession.

How much does it cost to buy a property in the UK?

The latest figures show that property prices in England have reached a record high in 2022.

Covid-19 has pushed house prices up steeply.

According to Rightmove, the average house price in England is now £368,614, which leaves many priced out of the market even if they have a deposit and stable income.

After the pandemic, there was a surge in demand for property, with many city dwellers looking to move to the countryside.

Property investors have also faced challenges during 2022 when considering their portfolios.

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Will the UK housing market crash in 2022?

There is growing speculation that the UK housing market may crash in 2022.

Despite this, property prices have risen consistently across the UK, making it the longest period of price increase in six years.

Low mortgage rates are still driving the property market, but there is growing concern that rising inflation will increase mortgage rates and deter house buyers and property investors.

The first half of 2022 has been strong, but some industry commentators predict that the housing affordability squeeze will significantly impact market behaviour from September onwards.

Month-on-month property price falls may follow.


If the UK goes into recession will property prices go down?

Entering a recession means that the UK’s GDP (Gross Domestic Product) would need to shrink for two consecutive financial quarters.

When a country goes into recession, house prices fall.

With a higher cost of living and the increased risk of unemployment, many prospective house buyers and property investors may be unable to purchase.

Recessions bring uncertainty, which means that banks can become reluctant to lend.

According to the Office of National Statistics (ONS), the average UK house price dropped by 15% during the 2008 recession.

The 2008-09 recession lasted five consecutive quarters and was the worst recorded since World War II.

Many UK property owners benefited from falling mortgage payments, leaving them with more disposable income.

Recessions generally lead to increased financial inequality, job losses, fewer promotions and pay freezes.

The UK property market comprises four key categories: privately-owned properties, council-run rental accommodation, rentals owned by private landlords, and housing association properties.

All of these categories depend on the UK’s overall economic health.

The economy is also driven by the well-being of the property market, as it usually reflects the country’s wealth and is a driver of related industries such as construction.

An economic downturn can inevitably harm property values.

Less desirable areas will struggle to maintain demand, although a recession can still hit even the most popular locations.

Since the last lockdown, the rising interest in moving home in the UK has resulted in a balanced market with supply and demand.

The key question for property buyers and landlords is will the demand continue if the UK enters a recession?

Should you buy property during a recession?

For many property investors in the UK, a more pertinent question is whether they need to buy during a recession.

Property investment during a recession is harder for first-time landlords.

Banks will look more closely, and lending will tighten the longer a recession continues.

A deepening UK recession could even lead the chancellor to enforce a reduction on bank income multiples to restrict borrowing.

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Should you sell property during a recession?

The same applies to this as with the previous question – ask yourself as a property investor if you need to sell during a recession.

Affordability comes into play when selling a property as much as when buying one.

Selling property costs still need to be met.

The UK property market will carry on regardless, so looking at personal circumstances during a recession is vital.

It is never worth trying to second guess property price fluctuations.

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