How would a house price crash similar to 2008 affect today’s market?

HBB Solutions analysed the impact of the previous property market crash during the 2008/09 recession, looking at what level of value was wiped from the average house price between the prior market peak and its lowest point during the recession.

Aapplying this house price percentage drop to the current average house price across each area of Britain, to see what a similar crash could mean based on today’s market values.

The research shows that with the average home now worth £295,747, the same 18.2% reduction today would wipe £53,885 off the average value of a property.

While London has failed to see the same level of boom as the rest of the UK in recent years, the capital could be hit hardest should the market crash, with over £93,000 wiped off the average value of a home.

The capital also accounts for many of the worst hit areas at the local authority level, with Kensington and Chelsea potentially due to be hit the hardest with property values falling by £378,034, while Hammersmith and Fulham (-£163,548) and Islington (-£152,379) would also be hit particularly hard.

Outside of London, the South East (-£78,896) and East of England (-£70,000) would also see some of the largest declines in property values should the market crash and, while the Scottish market would see the smallest reduction, house prices could still drop by over £22,000.

Outside of London at the local authority level, homeowners in Elmbridge may see £150,570 wiped off the value of their home.

Waverley (-£120,046), Epsom and Ewell (-£112,959) and Winchester (-£109,798) could also see some of the biggest reductions to current market values should a house price crash materialise.

Chris Hodgkinson, Managing Director of HBB Solutions said, “Although we’ve seen signs that the market has been cooling for quite some time now, the fears of a property market crash have certainly accelerated in the last week or so, with many mortgage lenders reacting swiftly to the threat of escalating interest rates.

“As a result, buyers are now facing a reduced choice of mortgage products, as well as a far higher monthly cost when it comes to their repayments. Many simply won’t be able to stomach this far higher financial commitment and, as a result, we can expect to see a sharp decline in house prices over the coming months as sellers struggle to achieve anywhere close to the highs of the pandemic property market boom.

“Whether or not this correction will be as disastrous as the 2008 crash remains to be seen, but one thing is for certain, those considering a sale should act quickly in order to secure a reasonable price for their home.”