This is a continuation of a blog posted previously about residential property prices in London and I want to take a look at the wider market in the South East.
I have vague recollections of house prices falling in the early 1990s but I was not as old or as grey as I am today. I only became a homeowner in 1996 and was ‘studying hard’ at University in the 90s crash but, as I say, I remember a few stories from back then relating to the hardship people had to endure. One such tale was that needing to move home as their job was being relocated, the homeowner found that negative equity prohibited it; not nice at all. I remember clearly it was very stressful for those involved, even if I was not directly caught up in it myself.
The previous blog said that Battersea seemed to have an oversupply of flats for sale whether they be affordable (for London) or stratospherically priced in the many millions of pounds. Since then I’ve spent a few idle minutes whilst commuting looking at Zoopla and I noticed a trend which I thought was worth sharing.
Do we believe Zoopla?
I live in North Kent rather than London and after putting a variety of addresses around the South East, it quickly became apparent that more or less everywhere I looked was showing a negative return over 3 months. I then checked a few areas outside of normal commuter locations, Dover and Eastbourne, Southampton and Tunbridge Wells are all reporting -2.5% or so over 3 months. It’s not an exhaustive survey but those four towns are all quite different.
Properties are still more expensive than a year ago in all of those locations but only by a relatively small amount such as 2% or 3%.
I’m not at all sure what any of this means – and it could simply be Zoopla’s algorithm is wrong – but falling prices would be quite a shock to all of us who own properties and are used to the relentless increases we’ve enjoyed over the last 25 years or so.
What would happen if property did fall in value?
For those trying to buy a house for the first time, some sort of minor correction would be good news although it is not like prices are suddenly going to become properly affordable overnight anywhere near London. A significant correction will surely see first time buyers stay away because why pay for something now which could well be cheaper in a few months. This then becomes a self-fulfilling prophecy one imagines, because without people buying at the bottom of the ladder everyone else gets stuck.
Our home is our castle as the saying goes and I think that any price correction will do more to undermine consumer confidence than any other single event in recent years; it was the stability of our house prices that differentiated the UK from, say, Spain and Ireland in the banking crises back in 2008 and 2009.
With so many other things to worry about at the moment I am not sure any of us are in the mood to take a residential property correction in our stride but my tiny bit of research based on one website seems to indicate one might on the way.