Recessions are the property market’s killjoy

Ade Akindele
3 min readAug 25, 2020

The early-90s, GFC and COVID-19 recessions slowed-down explosive growth, but the show still goes on.

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

The late 80s flourished with low interest rates and tax cuts, but not for long as interest rates doubled in 1990 . Unemployment figures also rose to 3 million. Worth noting 22% of new first-time buyer mortgages provided NO deposits. This recession significantly impacted house prices and house repossessions peaked at 75,000 in 1991. It took up till Q3, 1993 to see a positive annual change in house 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.

The effect of the great recession was the most significant on the UK property market for mulitple reasons…

  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.

Read my analysis on the drastic effects that the great recession of 2008 had on the UK property market.

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.

Views are mixed however, as some market experts still expect a significant downturn and some think the property market is immune to the current recession as we have seen the ‘worst’ of the pandemic.

I have shared my views on the outlook of the property market (post-COVID) here.

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.

Focus on the why? The length of time the property market is down for is closely-linked to the cause. Great Recession (2008) was linked to sub-prime mortgages which caused a longer downturn than the early 90s recession.

Embrace volatility: Expecting property prices to see consistent growth with no downturn is quite frankly, unrealistic. For many, a property is a long-term asset and should be treated as such.

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Ade Akindele

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