Paul Cheshire, former Government housing advisor and professor of economic geography at the London School of Economics, has warned that UK property prices could be heading for a crash of up to 40%.
A fall in house prices on this scale would plunge many households deep into negative equity, hitting recent homebuyers hardest.
According to Professor Cheshire; “We are due a significant correction in house prices. I think we are beginning to see signs that correction may be starting. Historically, trends seem always to start in London and then move out across the rest of the country. In the capital, you are seeing house prices rising less rapidly than in other parts of Britain.”
He said this crash will be fuelled by the growing gap between wages on the one hand and house prices and the general cost of living on the other.
According to the latest house price index from the Office of National Statistics shows the average price of a property rose by 5.6% in the year to April, however there has been a slowdown in the rate of growth across the country and some regions, London in particular, have seen house prices fall.
Professor Christian Hilber, also from the LSE, warns that if Brexit leads to a recession or a protracted period of sluggish growth then this could have a knock on effect on house prices.
He said; “If Brexit leads to a recession and/or sluggish growth for extended periods, then an extended and severe downturn is more likely than a short-lived and mild one.”
Buying agent and property commentator, Henry Pryor, said recent buyers, who had paid off relatively little of their mortgage, would feel most affected by a fall in house prices and warned such a fall was possible.
He said; “Will prices fall? Yes, the market is cyclical and what goes up eventually comes down. Will they fall by 40%? Well, there is a part of the UK where house prices are half what they were just before the credit crunch a decade ago. It’s Northern Ireland.”If you’re concerned about negative equity on your property, contact Negative Equity UK on 0161 631 2727 or online at negativeequityuk.com.