UK market crash could take nearly eight years for property prices to recover

The latest research by leading online estate agent, eMoov.co.uk, has highlighted it could take the UK property market over seven years (7 years 7 months) to recover back to its current level, should the property bubble pop with the same detrimental impact of the 2007 crash.

Last time the market crashed it took nearly seven years for the average UK house price to return to its previous peak of £190,000, from when values started falling and begun to increase again 18 months later – although two regions are yet to fully recover at all.

Using data from the Land Registry, eMoov looked at the fall in property prices across each region at their pre-crash peak in 2007 and their lowest point in 2009, before values started to appreciate again. Using the current average for each region, eMoov then worked out what an identical drop over the same time span would mean today, before using monthly price growth data from the markets previous recovery, to work out the total time frame it would take for prices to return to their current level (crash plus recovery).

Between the end of 2007 and early 2009, the average UK house price fell by 19%. At today’s current average of £220,094, the same drop would result in the value of a property falling to £178,886 and a loss of £41,208 over 18 months. Based on the previous market recovery time and monthly price trend growth, it would take 7 years and 7 months for the market to make a full recovery and would require an increase of 24% to bring the average house price back up to a similar level as today (£221,282) – 7 months longer than the previous recovery period.

By Region

Looking at each region individually it is, of course, those in London who would see their property price return to normality the quickest. During the previous crash, it took London house prices 4 years and 7 months to return to the £298,000 threshold after they started to fall.

Today if the market were again to drop by 18%, it would wipe more than £85,000 of the average London house price, reducing it to £395,753. Based on the previous market fall and turnaround, it would take 4 years and 7 months for the London average house price to increase by the required 22% to once again exceed £480,000.

The South East saw the largest fall of all regions during the last crash but the higher buyer demand in the market means it would take the second shortest time to recover out of all UK regions (6 years, 5 months), followed by the East of England (6 years, 7 months), South West (7 years, 8 months), East Midlands (7 years, 9 months) and West Midlands (8 years, 5 months).

Although the market in Scotland has recovered a similar crash would require a 8 year and 8 month time span to fall and then climb by the required 17%, and push the average house price back over £140,000. The average house price in the Yorkshire and Humber region was also slow to recover, returning to its pre-crash peak of £149,366 in the middle of last year. However, a similar crash today would result in a recovery time of 9 years and 6 months for the market to once again return to strength.

Only just recovered

The slow rate of growth since the last market crash in both the North West and Wales means that the average house price across the two has only recently returned to previous pre-crash levels. Like Yorkshire and Humber, the slower market recovery since 2009 means that a similar crash today would take 9 years and 7 months to recover to the current average.

Yet to recover

Unfortunately for homeowners in the North East and Northern Ireland, the markets have failed to recover to the levels enjoyed prior to the last crash. Before the crash, the average house price in the North East was £138,306 and £224,670 in Northern Ireland but post-crash they slumped to £117,079 and £140,190.

Since then, the average house price in the North East has crept up by just 9.16% to £126,738 but in Northern Ireland prices have continued to decline, down -11.18% with the average house price now just £124,007.

The same crash today would put the average house price in the North East region at just £107,286 and based on previous market recovery trends, it would take nearly 18 years just for the market to return to current depleted values, let alone pre-crash levels.

There is no telling if the Northern Irish market will regain strength but a similar crash today could be disastrous and push the average house price as low as £77,378, with the further decline pushing values even further below this.

Founder and CEO of eMoov.co.uk, Russell Quirk, commented:

“We are by no means predicting the UK property bubble is about to pop and in fact, other than a potential prolonged flat rate of growth, we believe the market will remain in good stead for the remainder of the year.

“But, with the recent claims of an impending crash and a 40% fall in values, which quite frankly is outrageously unrealistic, we thought a more accurate look at the potential impact of a crash was needed. Of course, we can only predict what may happen based on past evidence, but this paints a far more realistic picture than pulling figures from thin air.

“Although many in London and the more inflated markets will be outraged at the idea of a four to seven year set back where their property asset appreciation is concerned, they would do well to spare a thought for those in the North East and Northern Ireland who are still enduring the legacy of the last market crash.

“What this research highlights is that if you really do believe that what goes up must, at some point, come down, then you are far better of selling your home now with a very slight depreciation of below 1%, than in the midst of a market crash with a potential deduction of around 19% on your property price, albeit a speculative crash at present.”

 Region Average House Price Pre-Crash (2007)

Average House Price Post-Crash (2009)

Change (%)

Current Average House Price

Same Crash Today

Resulting Average House Price

% Increase Required to Return to Current Average

Recovery Period in Years & Months

New Average House Price

United Kingdom

£190,032

£154,452

-18.72%

£220,094

-18.72%

£178,886

23.70%

7.7

£221,282

London

£298,414

£245,351

-17.78%

£481,345

-17.78%

£395,753

21.92%

4.7

£482,503

South East

£238,302

£191,156

-19.78%

£315,807

-19.78%

£253,327

24.42%

6.5

£315,189

East of England

£209,102

£168,263

-19.53%

£284,097

-19.53%

£228,611

25.39%

6.7

£286,655

South West

£212,666

£171,666

-19.28%

£243,969

-19.28%

£196,933

24.00%

7.8

£244,198

East Midlands

£159,537

£129,915

-18.57%

£180,903

-18.57%

£147,314

23.25%

7.9

£181,565

West Midlands

£150,127

£124,903

-16.80%

£167,555

-16.80%

£139,403

20.68%

8.5

£168,469

Scotland

£142,294

£120,994

-14.97%

£143,106

-14.97%

£121,685

17.02%

8.8

£142,396

York and Humber

£149,366

£123,833

-17.09%

£155,268

-17.09%

£128,726

22.30%

9.6

£157,432

Wales

£149,164

£123,104

-17.47%

£149,817

-17.47%

£123,643

20.45%

9.7

£148,928

North West

£151,088

£124,654

-17.50%

£153,297

-17.50%

£126,476

21.39%

9.7

£153,529

North East

£138,306

£117,079

-15.35%

£126,738

-15.35%

£107,286

18.06%

17.9

£126,662

Northern Ireland

£224,670

£140,190

-37.60%

£124,007

-37.60%

£77,378

-11.18%

£68,727