Is the Housing Market Poised for a Crash?

During 2013 and the formative months of this year, the UK housing market emerged as one of the most prosperous in the world and was considered as a key driver of economic growth. Led by a thriving London market, British real estate was on a decidedly upward trend that sent property prices soaring.

While the market remains relatively buoyant, however, there are signs that the recent level of growth may be stagnating. After growth fell to just 0.1% between June and July, house prices stalled completely in September as values began to fall flat nationwide. If this trend continues, the market may begin to collapse and leave home owners trapped with negative equity.

Is the Housing Market Poised to Crash in the Next Eighteen Months?

Before determining whether or not the market is being primed for a sudden and catastrophic crash, it is wise to consider the actual facts. As a starting point, it cannot be denied that after an estimated eighteen months of continual growth and consolidation, there is now a distinct chill in the air that is undermining the prevailing levels of positive sentiment. In fact, growth has come to a virtual standstill during the third financial quarter, and this is the first time that this has happened since January 2013.

Housing Market Poised for a Crash

With the momentum now having turned and the rate of growth having fallen considerably during the last four months, it is clear that the market is now on a downward trend. The question that remains is whether we see a complete reversal in the market between now and the beginning of 2015, which would trigger declining property values and leave a large number of buyers encumbered with large mortgages and negative equity. This would serve as a precursor for a longer-term market crash, and bring back memories of the Great Recession.

The Final Word for Home Owners

Even with these facts and the potential for further market decline in mind, there is no reason to suggest that we will see a repeat of the subprime mortgage collapse of 2008. Not only are lenders far more cautious than they were prior to the great recession, but home owners and potential buyers themselves have a greater level of awareness and understanding when it comes to taking on mortgages.

If history has taught us one thing, however, it is that we should never take a buoyant real estate market for granted. Just as lenders have a responsibility to follow regulations and extend mortgages with caution, buyers must adopt a proactive approach to monitoring market trends and making informed decisions. It is also important for both home owners and buyers to understand the importance of value in the market, and regional resources such as can be used to compare relevant prices within specified geographical regions.