What’s going to happen to UK property prices?

Here’s a bit of historical context: in the last major house price slump, prices peaked in the third quarter of 1989*, hit bottom in the first quarter of 1993 when they were 20% lower and did not rise back above the pre-slump peak again until the first quarter of 1998.

What would similar timescales mean for us this time around? Prices peaked in the third quarter of 2007, so that would mean them not hitting bottom until the first quarter of 2011 and not getting back to their pre-slump levels until the first quarter of 2016. In other words, not only would house prices still be falling at the time of the next general election, they would also be relatively weak all through the next Parliament. Prices are currently 15% down on the peak (compared with that 20% fall last time).

As to whether the length and depth of the last slump is any guide to the next one, who knows? Though so far those who were saying, ‘ignore the past, we’ve rewritten all the rules about slumps’ don’t seem to have come out of the forecasting business terribly well.

* All figures in this post based on the Nationwide house price index.