With the Bank of England forecasting that the UK is likely to enter recession this year we will look back at the past and try to answer the question – do property prices fall in a recession?

The UK property market has been booming for a couple of years now. And this has been in difficult times, when most people might have expected it to crash. Most people might also expect that a recession would be the final nail in the coffin that would, once and for all, lead to a crash. With the market having proved so resilient of late, however, will this necessarily be the case?

Let’s try to gain some insight by looking back at past UK recessions (within the last 50 years or so) to see what happened.

Economists broadly accept that there have been five UK recessions in the last 50 years:

Between 1973 and 1975

There were five non-consecutive quarters of recession, with the economy contracting up to 2.7%. The 1973 oil crisis is largely held to blame for this period of recession.

The average house price in 1973 was around £9,000. House prices grew by up to 24% annually over this recession, although tailing off to around 7-8% growth by the end of it.

In 1980 and 1981

Four consecutive recessionary quarters saw the economy contract by up to 2%. Sharp Government spending cuts at the time, and the decline of traditional heavy industries, are sometimes given as reasons.

House prices kept rising throughout this period, by up to 27% annually at the start of the recession and around 4% at the end of it.

In 1990 and 1991

There were five consecutive recessionary quarters with a maximum reduction in the economy of 1.1%. Rapidly rising inflation after a period of economic boom and Government policy (relating to the European Exchange Rate Mechanism) are said to be causes.

House prices fell quarter after quarter during this period. The annual house price fall in the last quarter of 1990, for example, was 10.7%.

In 2008 and 2009

There were five consecutive recessionary quarters with a maximum fall in growth of 2.2%. The US subprime mortgage crisis and rising world commodity prices are often given as reasons.

House prices fell quarter after quarter during this period. The annual house price fall in the first quarter of 2009, for example, was a steep 16.5%.

In 2020

There were two recessionary quarters. The economy contracted by 18.6% in the second quarter. The Covid-19 pandemic caused this short but sharp recession.

House prices kept on growing during this recession. But only very modestly – around 2% over the year.

House price data is from the Nationwide Building Society House Price Index.

So what can we learn from these past recessions? Does the coming recession mean that house prices will fall?

We’ve analysed the data in more detail and put together a few thoughts:

Recessions usually occur as a result of some kind of sudden shock to the economy. (Covid, Brexit and the energy crisis would almost certainly count as sudden shocks.) But a sudden shock does not always mean there will be a recession.

Every recession is different and caused by different factors. So it is very difficult to compare past ones to try and anticipate what might happen in the next one.

House prices frequently rise sharply or ‘bubble’ before a recession, but not always.

House prices sometimes fall in a recession, and sometimes they don’t. It’s very difficult to draw useful conclusions.

Property prices can keep rising in a recession .... sometimes.

When a recession causes property prices to fall the falls can be by fairly significant amounts which are likely to affect the property market, buyers and sellers.

When a recession causes property prices to fall prices always recover eventually. But this can be either very quickly or pretty slowly.

Property values always rise over the long term. An average house worth around £9,000 in 1973 and £68,000 25 years later in 1998 is worth around £270,000 today.

When recessions happen they seem to be, thankfully for those impacted by them, usually fairly short – typically around five quarters at most.

In summary, it’s pretty much impossible to predict what will happen in a future recession by looking at past ones! And it’s pretty much impossible to say what will happen to house prices in a coming recession. They might keep on rising and they might fall. A sensible guess might suggest that they will keep rising but only very modestly for a year or so, before starting to accelerate more rapidly once again.


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