The economy in the UK has been turbulent since the pandemic hit in 2020, with stages of steep decline and some periods of growth. This has had widespread ramifications across many areas of living – but one sector that has been affected quite interestingly is the housing market.
Whereas people may have had to tighten their purse strings in other areas of life, property owners may have been able to benefit from the rise in property prices as demand for housing soared.
However, what goes up must come down, and with the UK looking like it will enter a period of recession, what impact will this have on potential buyers or property owners looking to sell?
Let’s take a look at what normally happens to house prices during a recession and see if there is anything that we can predict for the future by learning from the past.
What does recession mean?
The economy is labelled as being in a recession when there have been two consecutive quarters of negative growth in the GDP (gross domestic product).
This means that there can be a sole quarter with significant negative growth but this will not be labelled a recession if the economy experiences positive growth in the next quarter.
Before 2020, the last major recession was during the housing crisis in 2008 which lasted until the end of 2009 but had lasting consequences over the following five years, with many losing their jobs or seeing their wages stagnate compared to the cost of living.
What happens to houses in a recession?
A drop in value is usually what happens to house prices in a recession in the UK, but some geographic areas are more susceptible to this than others.
The reason for this drop in price is that during a recession, the standard practice is for the Bank of England to raise the Bank Rate (you may hear this referred to as the base rate) – which is one of the key metrics when other lenders set their interest rates. And when interest rates rise, goods and borrowing become more expensive.
This results in people cutting down on spending and holding off on making big purchases, such as taking out a mortgage to finance property transactions. During periods of low demand, it is common for prices to fall as it’s hard to sell a house with no buyers, especially so when it’s expensive.
Is a recession coming in the UK?
As of 2022, most experts agree that it is looking likely there will be a recession within the next few years.
There are some, though, who think that a recession will not happen. Although, even these experts remain pessimistic that there will be actual periods of growth, and the cost of living will remain high as excessive inflation sticks around.
Are house prices going down?
Currently, house prices are not going down. In fact, demand and prices both remain quite high. For property owners, this is good news as it means your market value will be increased.
However, should prices begin to tumble as a result of a recession housing market then property owners will be faced with one of two choices: weather the storm or quickly cash in. This will be a particularly tough financial choice for landlords looking to sell part of their rental portfolio as opposed to individuals looking to sell their homes.
Sell your house quickly with Easy Sale
Should property owners decide to sell before house prices fall, then they may see benefits from using a cash property buyer as opposed to selling to a buyer with a mortgage.
The reason for this is that traditional property sales take much longer to complete, and until completion a buyer is not locked in to a purchase. So should a recession hit during conveyancing and property prices fall, your buyer may back out of the transaction and look elsewhere for a cheaper deal.
At Easy Sale, we are a team of cash buyers and pay up to 85% of market value for properties. Our transactions complete very quickly, with a history of being able to exchange contracts in as little as 48 hours in some cases. Therefore, it may be beneficial to cash in on property quickly while market values are high.
So, if you have found yourself wondering ‘how can I sell my house for cash’, then get in touch with us at Easy Sale to get the ball rolling and free up a bit of money to help you through any turbulent periods that may be ahead.