What Has Happened to the Loughborough Property Market Since the Last Property Market Crash?

A handful of Loughborough landlords and homeowners have been asking me what would happen if we had another property crash like we did in 2008 and 2009?

The UK property crash in 2008/2009 caused property prices in the UK to drop by an average of 18.37% in a period of 16 months. On the run up to the Parliamentary vote on Brexit scheduled for March, a number of people asked what a no-deal Brexit would do to the property market and if there would be a crash as a result. I have discussed in a previous article on the chances of that being slim but it's always a possibility. However, assuming it happens, it is my opinion the outcome of a no-deal Brexit would be no worse than the country’s 2008/2009 credit crunch property crash; the late 1988 property crash; the 1974 property crash; 1951 property crash … I could go on. 

The British economy would bounce back from the shock of a no-deal Brexit with lower property values and a continued low interest rate environment (together with an additional round of Quantitative Easing) and that would mean we would see a similar bounce back as savvy buyers saw it as a fantastic buying opportunity.

So, let me explain the reasons I believe this. Many said after the Brexit vote in June 2016, we were due a property crash - but we all know what happened afterwards. Initially, let’s see what would happen if we did have a crash, how quickly it would bounce back, and then finally discuss how the chances of a crash are actually quite minimal.

Therefore, to start, I have initially split down the types of property in Loughborough (Detached/Semi etc.) and in the red column put the average value of that Loughborough property type in 2009. Next in the orange column shows what those average values are today in 2019.

Loughborough Property Market
The likely effects of a Property Crash and Recovery

Average Value in 2009
Average Value in 2019
Assumed Average Value by Q2 2020  (if Property Crash)
Assumed Value in 2024/5
Semi Detached

Now, assuming we had a property crash like we did in 2008 when average property values dropped nationally by 18.37%, I applied a similar drop to the current 2019 Loughborough figures (i.e. the green column) to see what would happen to property values by the middle 2020 (because the last crash only took 13/14 months). Finally, what would subsequently happen to those same property prices if we had a repeat of the 2009 to 2014 property market bounce back.

Of course, these are all assumptions and we can’t factor in such things as China going pop on all its debt. Yet either way, the chance of such a crash coming from internal UK factors are much slimmer than in another of the four property crashes we have experienced in the last 80 years. Why, you might ask?

The seven reasons I believe are these:
  1. The new Bank of England mortgage rules on lending 2014 to stop reckless lending that fuelled that last crash;
  2. Low inflation;
  3. Low mortgage rates (the average Brit’s fixed rate mortgage is currently 2.26% and the variable rate mortgage of 3.07%);
  4. Wage rises are forecast to continue to outgrow inflation;
  5. Unemployment figures dropping to 4% (down from 8.4% in 2011);
  6. The high percentage (67.7%) of all British mortgages being on a fixed rate;
  7. And notwithstanding the distractions of Brexit over the last few years, it cannot be denied that the British economy has slowly and steadily been heading in the right direction for a number of years, built on some decent foundations of a steady housing market (unlike the 1988 and 2008 crashes when the housing market got overheated very quickly on the run up to the crashes).
So as the circumstances are much different to the last two crashes, the chances of a crash are much slimmer. Yet if we do have a crash, for the very same seven reasons above why the chances of a crash are unlikely, those seven reasons would definitely contribute to making the ensuing recession neither too long nor substantial in scale.

One final thought for the homeowners of Loughborough. Most people when they move home, move up market, meaning that in a decreasing market you will actually be the winner, as a 10% drop on yours would be much smaller than a 10% drop on a bigger property. Think about it.

One final thought for the new and existing buy to let landlords of Loughborough. Well, the questions I seem to be asked on an almost daily basis by landlords are: 
  • "Should I sell my property in Loughborough?"
  • “Is the time right to buy another buy to let property in Loughborough and if not Loughborough, where?”
  • “Are there any property bargains out there in Loughborough to be had?”
Many other Loughborough landlords, whether they are with us or other letting agents, like to pop in for a coffee, pick up the phone, or email us to discuss the Loughborough property market and to see how Loughborough compares with its closest rivals (Shepshed, Coalville and Leicester) and ask the three questions above. I don’t bite, I don’t do hard sell, I will just give you my honest and straight-talking opinion. I look forward to hearing from you. Give me a call on 01509 260777 or email me at j.lee@belvoir.co.uk.