Home Truths: Busted! House Prices Don't Always Rise

The dream of ever-increasing property values is a powerful one, great if you are already a home owner, not so if you are trying to get onto the ladder!

But is it reality?

In our first "Home Truths" blog, we debunk the myth that: house prices always go up.

Why We Believe the Myth:

There's some truth to the idea that buying a property in the U.K. property market is a good long-term investment. Historically, in many areas, house prices have generally shown a trend upwards. This can be due to factors like:

• Population growth: More people needing homes can drive up demand and prices.
• Inflation: The general rise in prices over time can also make houses seem more affordable in the future compared to today's cost.
• Limited supply: Land isn't being made any more, so developable space can become more valuable.

The Reality: Markets Fluctuate

However, the U.K. property market isn't immune to economic downturns. Here's why prices can fall:

• Recessions: Economic slowdowns can lead to job losses and decreased buyer confidence, impacting demand and pushing prices down.
• Interest rate hikes: Higher borrowing costs can make mortgages less affordable, reducing the pool of potential buyers.
• Oversupply: Too many houses on the market relative to buyers can create a downward pressure on prices.

Historical Examples:

Let's look at some historical examples:

• The Early 1990s Housing Market Crash: Following a period of rapid price increases, the U.K. housing market experienced a significant correction in the early 1990s.
• The 2008 Financial Crisis Impact: While the U.K. market wasn't hit as hard as the U.S., the 2008 crisis still caused house prices to fall by around 18%.

The Takeaway:

While property can be a great long-term investment, it's crucial to understand that the market fluctuates. Don't base your buying decisions solely on the assumption that prices will always rise. Many people lost out financially in the 2008 crisis due to overinflated house prices coming down significantly in a short space of time, the market then stagnating and mortgage deals being withdrawn and pulled from the market.

Here are some smart home buying tips:

• Do your research: Understand market trends in your desired location.
• Factor in affordability: Don't overextend yourself financially.
• Consider a long-term perspective: While prices may dip in the short term, they can recover over time.

By being informed and making well-considered decisions, you can navigate the property market with confidence.

So if you want more information or advice on any aspect to do with property, please do get in touch

Stay tuned for our next Home Truths blog where we'll tackle another common myth!