A History of UK House Price Crashes

Will there be a UK house price crash in 2023?

If you’re a homeowner who is considering selling their property, the fluctuations of the housing market will be of high interest. House prices have recently seen their biggest annual fall in over 10 years, with many potential sellers speculating if a possible house price crash will affect their chances of selling their home. Similarly, you may be a buyer interested in knowing whether house prices will decline and present an opportunity to afford a new home.

Want to understand more about UK house price crashes and their potential impact? Don’t worry, we’ve got you covered. From what they are, the history of housing crashes in the UK, and what they may mean for the current housing market, read on to find out more.

What is a house price crash?

A house price crash is a sudden and significant drop in house prices in a particular market or region.

Is a UK house price crash a bad thing?

A housing crash can have both positive and negative effects, depending on the circumstances. It can make homes more affordable for first-time buyers, but it can also lead to economic uncertainty and job losses.

A history of UK house price crashes

Housing market crashes of previous decades have played a significant role in shaping life in the UK and have had a significant impact on the economy and people's livelihoods. To be able to try and make house price crash predictions for 2023, it’s helpful to understand what has happened in the past and why.

The 2008 financial crash

This was a global financial crisis triggered by the collapse of the US housing market. In the UK, house prices fell by around 20% between 2007 and 2009, with many homeowners facing negative equity (when the value of their home is less than the outstanding mortgage). The crisis was caused by a combination of factors, including reckless lending by banks and the widespread use of subprime mortgages. However, this was not the first time the UK experienced a housing market crash.

The early 90s recession

During this period of economic downturn, interest rates were raised to 15% and left in place to control inflation. House prices fell by around 20% between 1989 and 1993, with many homeowners struggling to meet mortgage payments. It was not until the end of the 90s that the market began to recover.

The mid-1970s

This was a period of economic and political turmoil in the UK, marked by high inflation, unemployment and the so-called 'Winter of Discontent'. House prices fell by around 25% between 1974 and 1977, with many homeowners struggling to sell their properties. The crisis was eventually brought to an end by a combination of government intervention and economic recovery.

The 1950s

Between 1952 and 1958, house prices fell by 17%. The end of post-war austerity measures in 1952 saw a period of strong economic and wage growth; however, the 1956 Suez Crisis brought this to an end. The demand for housing dropped, and the government introduced measures to control inflation.

The Great Depression (1920s)

A time of economic and social upheaval in the UK, characterised by high unemployment, falling industrial output, and social unrest. House prices fell by around 30% between 1920 and 1922, as demand for housing dropped and many homeowners struggled to meet mortgage payments. The building boom of the early 30s is largely credited as the primary factor in bringing Britain out of the depression.

What can we learn from these previous house price crashes?

A key takeaway is that housing market crashes can happen for a variety of reasons, from economic downturns to policy changes. Another lesson is that these crashes can have far-reaching consequences, including job losses and widespread economic uncertainty. It's essential to keep a close eye on the housing market and take steps to mitigate risks.

Housing market predictions

Looking to the future, there are mixed predictions on what will happen to house prices.

Some experts predict a UK house prices crash due to the economic fallout from the coronavirus pandemic, while others believe that the current shortage of housing stock will keep prices high.

Others predict a slight decline or stagnation in prices. Ultimately, the housing market is complex, and it's difficult to predict with certainty what will happen in the future.

However, it's essential to stay informed about the latest trends and developments to make informed decisions about buying, selling or investing in property.

House price crash FAQs

When was the last time house prices crashed?

The last time there was a UK housing crash was during the 2008 financial crisis.

When was the worst housing market crash?

The worst housing market crash in the UK was during the Great Depression of the 1920s, with house prices dropping by up to 75%.

How much did house prices crash in 2008?

House prices dropped by around 20% during the 2008 financial crisis.

Is a UK house price crash coming?

There are mixed predictions on whether a UK house price crash is coming, but take a look at the UK House Price Index for December 2022 to see what recent price changes may have happened in your region.

Will house prices fall in 2023?

It does seem likely house prices will continue to fall in 2023. The Mini Budget set out by the government in September 2022 forecasted a drop of 20%. However, more recent predictions from Lloyd’s Bank forecast a price drop of 8%. Given the market fluctuations in reaction to changing government policy and global economic conditions, it’s best to stay informed throughout the year.

Are house prices going to fall?

Some trends indicate house prices are going to fall, but it's uncertain to what extent they may fall or not, as it depends on various economic factors and the housing market itself.

Why are house prices so high?

House prices are high due to a combination of factors, including high demand, limited supply, low interest rates and government policies.

Have house prices dropped?

This depends on the region you’re looking at, as prices can vary. House prices have dropped in some areas and increased in others, depending on various factors such as the of level demand, proximity to local amenities and changes in demographics.

What are the regional variations in house prices?

There are significant regional variations in house prices in the UK, with London and the Southeast having the highest prices. Discover the house prices in your area.

How do house prices differ for different types of property?

House prices vary depending on the type of property, with detached properties generally being more expensive than flats or terraced houses.

Is there more demand for properties in rural locations?

There has been an increased demand for properties in rural locations due to the pandemic and the rise of remote working. Rural areas also tend to be cheaper to live in than the city, so in line with the increase in the cost of living, more people have favoured settling in these areas than previously.

How do UK house prices compare to other countries?

UK house prices are generally higher than in many other countries, although there are significant variations between different regions and cities.

How low (and how fast) will UK house prices go?

It is difficult to predict how low UK house prices will go or how quickly they will drop, as it depends on various economic factors and the housing market itself.

Why have UK house prices been so high?

UK house prices have been high due to a combination of factors, including high demand, limited supply, low interest rates and government policies.

Why are UK house prices starting to drop?

UK house prices may be starting to drop due to the economic fallout from the coronavirus pandemic and other factors.

What does ‘slowing’ mean in the property market?

‘Slowing’ in the property market refers to a decrease in the rate of growth of house prices and sales. It can indicate a cooling off of the market and a shift towards a more balanced supply and demand.

How do house prices differ for different property types?

House prices differ for different property types based on factors such as location, size, and condition. Generally, detached properties tend to be more expensive than flats or terraced houses, and properties in desirable locations such as city centres or coastal areas may also command higher prices. Additionally, properties in need of renovation or with certain desirable features (such as a garden or off-street parking) may also be priced differently.

Want to find out what your house could be worth?

Book a free house valuation or sell your home with Purplebricks today. We can even help with tips on how to sell your house. And remember, at Purplebricks we don't take a percentage of your selling price — and you'll never find hidden costs or high fees. Instead, we'll sell your home for free. There are optional extras along the way, but you never have to use them — it's your sale, it's your choice.