Tue 26th Feb, 2008
Why the property market might not crash
While there are signs everywhere that the housing market is heading towards a slowdown these signs increasingly show that we might not be heading towards a crash but far more likely a slow progressive decline.
However there are other factors that might work together to prevent us from having a house-price crash. Two main underlying factors have been identified by experts across the sector and generally enjoy widespread support.
First of all the UK economy is far stronger today than it was in the early 1990s when we last saw a house price crash. On the back of the strength of the broader UK economy we should be able to avoid going towards a full blown property crash.
Currently experts are advising that we have sound economic fundamentals as well as very strong employment which will both contribute to keeping demand for housing strong.
The second factor helping the UK economy avoid a full blow crash is the fact that there are now more households in the UK than homes available. Following the basic principles of economics while demand for housing is greater than supply prices won’t come down. This is tempered by the lower availability of home loans for households who cannot stretch to the monthly loan repayments.
It is currently estimated that there are around 180,000 new homes being build across the UK every year. However in order to meet demand for new homes the Government estimates that a figure more in the region of 230,000 would be necessary. This would only help keep up with annual growth however and not actually the total amount of people in Britain that want a home.