The Bank of England believes the country will enter a recession by Christmas which lasts for 15 months.
Money experts and economic figures have predicted that Britain will suffer its longest downturn since the 2008 financial crisis in the coming months.
The bank’s monetary policy committee has warned: ‘Real household income after tax is projected to fall sharply in 2022 and 2023, while consumption growth will be negative.’
While a recession affects people in different ways, homeowners and people hoping to get into the market will especially want to look at what a recession could mean for housing.
Metro.co.uk spoke exclusively with Zoopla CEO Richard Donnell to explain what people can expect…
Do house prices/values fall in a recession?
We asked Richard if the properties will decrease in value for those who want to sell, or if those who want to buy will be able to buy properties at a lower price.
He said: “It depends on how severe the recession is. Historically, house prices tend to fall when there is a deep and prolonged contraction in the economy with rising unemployment.’
He continued: “The outlook is uncertain, but the Bank of England’s forecasts do not suggest a repeat of previous downturns.”
“The housing market is not immune to the impact of higher mortgage rates and cost of living pressures, and we expect the growth rate to slow in the second half of the year to 5% and then lower in 2023.”
What happened to the housing market during the last recession?
Looking for patterns or lessons from the last severe recession, Richard explained: “The global financial crisis of 2007 saw the availability of mortgage finance contracts which made it much more difficult for people to borrow, reducing the demand for housing.”
“This, together with rising unemployment, caused average house prices to fall by 12%. This led to fewer homeowners moving and the rise in market activity started in London from 2010 and the wider market from 2013.’
What does a recession mean for first-time buyers?
We asked Richard about it a recession is a good time for first-time buyers. Does it make it easier to get on the ladder?
He said: “At a time of heightened uncertainty, such as now, some first-time buyers are waiting because they think homes could be cheaper. But the reality is that there have only been 31 months of falling house prices in the last 20 years.’
“These months were all between 2008 and 2012. So the advice would be not to wait and hope for housing to become cheaper.”
“Prices are set to continue to rise slowly in most places. If you think your household income will be flat or rise over the next 2 to 3 years, there is limited point in deferring. Just spend plenty of time doing your research. Find a home that meets your needs and that you feel you are paying a reasonable price for. Get mortgage advice to help with this.’
MORE: A ‘second Great Depression is coming’ and recession ‘99.9% likely in two years’
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