How many times have you heard someone say “property prices never go down”? Well here’s the truth.
Between the second quarter of 1989 and the final quarter of 1995 property prices in the UK fell 18%. But that was in nominal terms, i.e. the average price of a UK home fell from £62,244 to £50,930. In real terms however, i.e. adjusted for inflation, property prices fell 37%, and anyone who thinks that can’t or won’t happen again is deluding themselves.
In fact, the only reason this hasn’t happened already if because the government has implemented unprecedented monetary and fiscal policy in the form of record low interest rates and massive government spending. Not to mention all the money printing.
In my opinion, once interest rates begin to rise, property prices in the UK will fall 30% to 50%, and that’s in nominal terms. In real terms I expect them to fall a great deal more. More on this tomorrow…