UK house prices would take almost eight years (seven years, seven months) to recover back to their current levels, should the property market crash as it did in 2007, according to the latest study by online estate agent eMoov.co.uk.
The last time the market crashed, it took nearly seven years for the average UK house price to return to its previous peak of £190,000, from which point, values began falling, before starting to rise again 18 months later. However, two regions are yet to fully recover at all.
Using figures from the Land Registry, eMoov assessed the fall in property values across each region from their pre-crash peak in 2007 and their lowest point in 2009, before prices started to appreciate again.
Using the current average house price for each region, the agent then calculated what an identical drop over the same timespan would mean today, before using monthly price growth data from the time of the previous recovery to work out the total timeframe it would take for values to return to their current level.
Between the end of 2007 and early 2009, the average UK house price decreased by 19%. At today’s current average of £220,094, the same decline would result in the value of a typical home falling to £178,886 and a loss of £41,208 over 18 months.
Based on the previous market recovery time and monthly price growth trends, it would take seven years and seven months for values to make a full recovery, and would require an increase of 24% to bring the average house price back up to a similar level as today, which is seven months longer than the previous recovery time.
Looking at each region individually, those in London would see their house price return to normality the fastest. During the previous market crash, it took the capital four years and seven months for property values to return to the £298,000 peak set in 2007.
Today, if the market again dropped by 18%, it would wipe more than £85,000 off the average London house price, reducing it to £395,753. Based on the previous market crash and subsequent turnaround, it would take four years and seven months for the capital’s average property value to increase by the required 22% to once again exceed £480,000.
The South East saw the largest fall of all regions during the last crash, but high buyer demand in the market means it would take the second shortest time to recover if the market suffered another crash (six years, five months), followed by the East of England (six years, seven months), South West (seven years, eight months), East Midlands (seven years, nine months) and West Midlands (eight years, five months).
Although the market in Scotland has recovered, a similar crash would require an eight year and eight month timeframe to drop and then climb by the required 17% to push the average house price back over £140,000.
The average property value in Yorkshire and the Humber was also slow to recover, returning to its pre-crash peak of £149,366 in the middle of last year. However, a similar crash today would result in a recovery time of nine years and six months for the market to once again return to strength.
Only just recovered
The slow rate of growth since the last market crash in both the North West and Wales means that the average house price across the two has only recently returned to pre-crash levels.
Similarly to Yorkshire and the Humber, the slower market recovery since 2009 means that a similar crash today would take nine years and seven months to return to the current average.
Yet to recover
Unfortunately for property owners in the North East and Northern Ireland, the markets have failed to recover to the levels seen before the last market crash. Prior to the crash, the average house price in the North East was £138,306 and £224,670 in Northern Ireland. However, post-crash, they slumped to £117,079 and £140,190 respectively.
Since then, the average house price in the North East has crept up by just 9.16%, to £126,738, but, in Northern Ireland, prices have continued to drop, down by 11.18%, with the average value now standing at £124,007.
The same crash today would put the average house price in the North East region at just £107,286 and, based on previous market recovery time, it would take almost 18 years just for the average value to return to the current depleted values, let alone pre-crash levels.
There is no telling if the Northern Ireland market will regain strength, but a similar crash today would be disastrous, pushing the average house price as low as £77,378, with the further decline taking values even lower than this.
The Founder and CEO of eMoov, Russell Quirk, comments on the findings: “We are by no means predicting the UK property bubble is about to pop and, in fact, other than a potential prolonged flat rate of growth, we believe the market will remain in good stead for the remainder of the year.
“But, with the recent claims of an impending crash and a 40% fall in values, which quite frankly is outrageously unrealistic, we thought a more accurate look at the potential impact of a crash was needed. Of course, we can only predict what may happen based on past evidence, but this paints a far more realistic picture than pulling figures from thin air.”
He continues: “Although many in London and the more inflated markets will be outraged at the idea of a four to seven year setback where their property asset appreciation is concerned, they would do well to spare a thought for those in the North East and Northern Ireland, who are still enduring the legacy of the last market crash.
“What this research highlights is that, if you really do believe that what goes up must, at some point, come down, then you are far better off selling your home now, with a very slight depreciation of below 1%, than in the midst of a market crash with a potential deduction of around 19% on your property price, albeit a speculative crash at present.”
Do you believe that the property market will suffer another crash in the near future?