Property investors may be reassured by new research that predicts that the latest trend of property price depreciation is only likely to last a matter of months before the market bounces back.
The study analysed property data dating back to 2005, examining the duration and impact of periods of house price decline.
The researchers found that 32 periods of house price decline have occurred in Britain since 2005, with most consisting of singular monthly drops, while the longest decline spanned 10 months. On average, these declines lasted 2.2 months and impacted approximately 69,766 property sellers per month, totalling 704 transactions.
In the same period, the research found an equal number (32 periods) of house price growth, with the longest period of growth running for 19 months in 2015. During these periods, an average of 381,452 homes were sold, providing benefits to an estimated 85,961 property sellers per month. These results, therefore, demonstrate that the benefits garnered during the periods of growth far outweighed the negatives of the market declines.
In terms of geographical differences across the Bristish nations, England experienced the longest market declines as well as the longest periods of growth with an average decline duration of 2.3 months and an average growth period of 4.6 months. Scotland’s market saw an average decline duration of 2 months and an average growth duration of 2.6 months. Meanwhile, Wales experienced the shortest average decline duration of 1.5 months and average growth durations of 2.3 months.
Colby Short, Co-founder and CEO of GetAgent, which conducted the research, commented: “Last week’s UK House Price Index revealed the first signs of a house price downturn, with the monthly rate of growth dropping for the first time since October 2021.
This may understandably come as a cause for concern for the nation’s home sellers but the chances are they have nothing to worry about in the long term.
The property selling process is a protracted one and as our research shows, any period of downward price movement is generally short-lived, not to mention often marginal.”
Although Short’s responses were guided by the research, he was also keen to point out that although historical data can be a valuable tool in understanding the past performance of the market, it’s important to remember that it doesn’t guarantee future market trends.
In fact, with the Bank of England putting the base rate up another 0.5% last week to 4%, there is likely to be extended pressure on property investors in the coming months.
Another property expert, Rightmove’s Tim Bannister was pragmatic about the rate rise, saying: “It’s likely that many of those on a tracker mortgage will still be on a lower rate than most current fixed-deals even with this increase, so we’re unlikely to see any rush to fix from this group just yet.”
Adding: “For those considering taking out a fixed mortgage deal soon, the good news is that this increase was widely expected by the financial markets and will have likely been factored into their plans. This means that we may see fixed-rate mortgage deals continue to edge downwards in the first half of this year, as some stability and calm continues to return to the markets.”
Do you agree with the research’s conclusions that the current decline in property prices will be short-lived? Where do you see property prices heading in the next year?
