Many of you may be wondering what a recession means for the housing market and home prices. With two months in a row of unexpected slowdowns in economic growth and fears that the UK is headed for a recession, I decided to write an article outlining some key points from a real estate perspective. If you have any questions about buying or selling a property on time and within a reasonable budget, contact a York real estate agent who can help.
How does the onset of a recession affect home prices?
When an economy goes into a recession, not everyone is adversely affected, and no recession is the same. According to financial data, economists and financial analysts, the UK is expected to experience its longest economic downturn since the 2008 financial crisis. The National Bank’s Monetary Policy Committee forecast that real household income after tax will decline sharply in 2022 and 2023. while this is happening. , a decline in consumption growth is expected.
The expected recession in the UK will be the first since the peak of the COVID-19 pandemic in 2020, but it is expected to be as severe as the 2008 financial crisis. At the time, the transition to remote work was encouraging for both homebuyers. People who move seek housing layouts that offer more space, resulting in higher real estate costs. Since then, stamp duty holidays and low credit rates have boosted the domestic market. However, an economic downturn is expected to dampen the market.
A major risk facing homeowners during a recession is job loss. Recessions often encourage buyers to enter the housing market because property prices tend to fall as long as incomes remain stable. If it happens as predicted by experts, it will lead to lower savings and lower total debt. However, it should be emphasized that in this case, the increase in mortgage prices must be taken into account.
According to real estate website Rightmove, first-time homebuyers could potentially see monthly mortgage payments rise by an average of 40% of gross pay, the highest amount since 2012. This may result in typical monthly property mortgage payments. Owners will see an increase of over $1,000 from £813 earlier this year. This data is based on an average asking price from first-time owners of approximately £224,943.