Recessions are the property market’s killjoy

Analysed by Ade Akindele | Source: Nationwide HPI data

What’s a recession?

A recession occurs when GDP (Gross Domestic Product: measures the size of a country’s economy) contracts for 2 quarters in a row — basically caused by a decline in economic activity.

Early 1990s Recession (1990–91)

Historical annual change in UK property prices

Great Recession (2008–09)

The great recession massively affected the UK property market, worse than the early 1990s recession. I wrote a detailed piece on the reasons for the global financial crisis (2008), which was triggered by sub-prime mortgages and directly linked to homeowners who defaulted on their risky mortgages/loans.

  1. Property prices was hit the hardest with a 16% decline in prices in Q4,2008.
  2. The effects lingered on through to 2013 with obvious volatility in property prices shown above. Banks tightened their lending criterias and it changed the dynamics of mortgage lending forever.

COVID-19 (2020 — tbc)

The 2020 recession is very different for obvious reasons; linked to the COVID-19 pandemic & lockdown effect on the nation’s economic activity. The impact on the property market has been very different, which I also explained here. Pent-up demand and the stamp-duty holiday has led to an unexpected snap-back in property prices. We have seen a 1.5% annual growth in prices which is very unexpected.

Key takeaways

Recessions slow-down the train, but can’t stop it: Recessions HAVE mitigated explosive growth in past years, but it doesn’t stop growth.

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Ade Akindele

Ade Akindele

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