Property markets go up and down a bit, they crash, boom, bubbles form and burst – but how do you know what’s happening?

publication date: Apr 29, 2014
 | 
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books
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Property markets - how do you know what’s happening?



I’ve been writing about property prices (and rents) now for 14 years. One of my first articles was to explain the difference between the house price reports, but everyone has started to do that now.


Then I spent a lot of time talking about how averages weren’t reflective of what’s actually happening to property prices for homeowners, buyers, sellers, investors and renters. And it’s great that most do that now too. Even the latest BBC2 series on Estate Agents shows how tough some markets are with properties on the market for four years in some areas, while in others they are going for sealed bids in a matter of days.


One thing I haven’t been able to change though is the idea that a house prices rising does not actually equal a bubble. I’ve tried, but it seems now as soon as prices start rising, suddenly everyone is being told they will come crashing down again.


I’ve wondered, maybe I am wrong. May be the facts that I’m looking at such as:-

  • Average house prices in most regions across the UK are still less than £150,000

  • 8 / 13 towns/cities prices are still lower, on average, than £125,000 ie attract ZERO stamp duty

  • That only London’s house prices as a region have grown beyond 2007/8 levels

  • From 2000 to 2003/4 property prices were rising, and there was a bubble, the rise, on average, was 25-40%

I appreciate that in London many first time buyers are having a tough time buying, but over the last 5 years, half the number of first time buyers who have been ‘ready to buy’ since 2007/8 have actually bought. The pent up demand in 2013/2014 is therefore huge. This pent up demand won’t last forever and as prices rise in London, this will reduce affordability so the next set of first time buyers who were hoping to buy in 2014/15 is likely to be reduced.


And, as we can see from the data below, if history is of any use to us in predicting or analysing whether property prices are at bubble level or not, here’s a comparison of property price growth in the years following the 1990s crash versus the recovery we’ve seen in prices to date:-


London property price growth (Source: Land Registry data)

Year on year changes following the last recession:-

  • March 96 n/c 
  • March 97 +11.7% 
  • March 98 +16.2% 
  • March 99 +9.7% 
  • March 00 +25.7%

Changes following the credit crunch:-

  • March 09 -15% 
  • March 10 +12%
  • March 11 +2.4% 
  • March 12 +1%
  • March 13 +8%


So not only have we seen 13% rises in London year on year after the last recession, we’ve also seen this level of rise in the summer of 2010. During 2010, prices increased year on year to a height of 13% year on year, then dropped back to single figure growth by the end of the year. Back in 2010, there was not talk of a bubble then, but of course there was no ‘help to buy’ to blame – even though the number of people using the help to buy scheme in London is nowhere near enough to drive property prices up.

Read my London update for more information on what’s happening to prices in individual London Boroughs

Read my latest in-depth property price market update to find out what’s happening to property prices in your local region and town.  


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