In the last housing market crash it took nine years for house prices to regain their 1989 peak as initial falls were followed by years of stagnation. Will history repeat itself?
The latest survey from Hometrack out this morning shows that prices flat-lined for the third month in a row in July. While the market showed improvement in terms of the percentage of the asking price being achieved and the average time to sell, there was also a divide between southern England, where scarcity of supply is pushing up prices, and northern England, where there is more stock but weaker demand.
But director of research Richard Donnell argues that all the talk of green shoots in the first half of this year is likely to prove to be ‘little more than an unsustainable and short-term blip…fed by pent-up demand feeding back into the market from opportunistic cash buyers and households looking for family homes in southern England where supply is most constrained’.
The improvement may be real but off a very low base, he says. The market remains fragile and any increase in the supply of homes for sale could easily undermine the firmer prices seen over the last few months.
It’s hard to argue with his case that any broad-based recovery needs an improving economic outlook availability of mortgages. Instead, unemployment is set to rise to 3m next year and any improvement could easily be choked off by a rise in rock-bottom interest rates. The prospects of a public sector pay freeze and a wave of job cuts to come will only add to that.
And then there’s history. On the Halifax index, prices peaked in July 1989 and did not regain that level until March 1998. But as Donnell points out, it was five years for a sustainable recovery to get underway and we are only two years into this crash.
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