UK House Prices will Fall for as Long as Unemployment Rises

Almost everyone seems to have developed the belief that a further 10% will be enough for the UK housing market to hit rock bottom. This will mean a 26.5% drop from peak if you go by the current Land-Registry index, and 30 - 35% if you go by some of the other indexes floating around. Several reports have recently either forecast and/or said that this recession will be/is equal to or worse than the great depression of the 1930s.

This is undoubtedly based on the last recession/house price crash between the late 80s to early 90s, when the average house price fell 28% from peak to trough. But this recession is to be worse and there is no mystical floor when it comes to house prices. It is more likely that prices will continue to fall for as long as unemployment rises; for however long that maybe and to whatever percentage that fall is.

During the last recession and house price crash my parents decided to sell our house in Hull, so we could move back up to Scotland. The sale price was reduced by over 50% in order to achieve a sale.

I only found out this information the other day. I remember the saga though: the regular discussions about whether the estate agent was performing and the price was the problem, whether to lower the price yet again or change agents. I also remember that we changed from selling with the Halifax, to selling with William Hill and then sold within a week (with a 50% reduced price).

I also know it has been a constant wonder whether William Hill would have made short work of selling at a price a little bit higher. It was also a possibility that our moving to Scotland while the house was still on sale (selling as empty) was a factor in its selling.

Wonder and estate agents aside, the fact of the matter is, the selling price had to be reduced 50% before a sale was achieved. And there was no shortage of viewings either.

House prices in Hull continued to fall farther as unemployment rose, uninfluenced by falls elsewhere that kept the average fall country wide a lot less. The 'experts' claim that because there is more activity in the market, more viewings etc, the market is at or close to bottom does not hold water. The consensus is that this recession will be a lot worse than that of the 80s/90s, it is at least a very real possibility that house prices will fall further because of it.