What causes a property market to crash?

The English property market has been on a steady upward trend for several years, with prices continuing to rise and demand for housing remaining high. However, over the last few months we have experienced a change in this trend.  The Mini Budget car crash send interest rates into turmoil and prices in the housing market have been dropping since…

Will the market crash? We don’t know; but in this blog we discuss why a housing market actually does crash.

There are several factors that could potentially cause the market to crash. One of the biggest risks to the English property market is a potential economic downturn. If the economy were to take a turn for the worse, it could lead to job losses and reduced consumer confidence, which could in turn lead to a decrease in demand for housing. This could result in a drop in property prices and a market crash.

Another risk to the property market is a potential interest rate hike. If interest rates were to rise (like we have just seen), it would make borrowing more expensive, which could reduce the number of people who are able to afford to buy a house. This could lead to a decrease in demand for housing and a drop in property prices.

A third risk to the property market is a potential oversupply of housing. If there were too many houses on the market and not enough buyers, it could lead to a decrease in demand and a drop in property prices.

Finally, a potential change in government policies or regulations could also have an impact on the property market. For example, if the government were to increase taxes on property or make it more difficult for foreign investors to buy property in the UK, it could lead to a decrease in demand and a drop in property prices.

In conclusion, there are a number of potential risks that could lead to a market crash. Economic downturn, interest rate hike, oversupply of housing, and change in government policies are some of the risks that could potentially cause the property market to crash.

As it stands today there is not an oversupply of property; in fact there is still a slight shortage for family homes. There are no issues in the UK with employment levels and the ratio of employment is as good as ever. Inflation and Interest rates are the risk factors.  We have seen the impact of these already and at Avocado we expect to see some more reduction in asking prices over the coming months.

However the phrase ‘Crash’ is open for interpretation. At the start of Q4 2022 we at avocado forecast a circa 9-11% correction in prices (from the height of market values in June/July).  Reading the numbers, it looks like the correction is already around 60% done, and with positive news that interest rates are dropping along with the improvement in the pound value; we expect to see a stable market soon.

If you have any questions about the property market or would like to speak to a property professional, get in contact here.

Or if you're interested in knowing the value of your home, use our FREE online house price calculator here.