Are We Set For A Housing Market Crash?

8th August 2022

8 August 2022 by Tejvan Pettinger
When I started teaching economics in the early 2000s, I remember quite a few commentators predicting imminent house price falls because house prices were overvalued by historical trends, I used to occasional dip into house price crash forums to see a debate about when prices would fall. Yet, since 2000, even accounting for the financial crash, UK and US house prices have witnessed a remarkable, above-inflation rise.

However, despite the housing market often defying gravity and long-term affordability measures, there are good reasons to believe this time is different as a combination of factors look set to cause a fall in house prices. The main factors are very high price to income ratios, combined with rising interest rates, economic slowdown and cost of living pressures.

UK house prices have risen from £77,000 (2000) to £270,000 (Q2 2022) Even adjusted for inflation, house prices have risen considerably. There has been a 150% real increase since 1996.

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