The UK market could see a double-digit rate of property value decline, taking over five years to recover, according to Sourced Capital
Based on market data from previous recessions, the UK market could see a double-digit rate of property value decline, taking over five years to recover, according to peer-to-peer lending platform Sourced Capital.
The number of property repossessions could also rise in the event of a coronavirus-induced recession.
Sourced Capital’s analysis of government data found that during the recession of the early 1980s, property prices increased by 8.6%, but the number of repossessions spiked at 440%.
Ten years later, during recession in the early 1990s, house prices dropped by 1.4%, and repossessions rose by 616%.
The 2008 recession saw prices drop by an even greater 13.8%, while repossessions went up by 445%.
Stephen Moss, founder and managing director of Sourced Capital, said: The current state of the market may bring cause for concern to many but at present, it sits in limbo and any impact of the current pandemic will be easily rectified once normality returns. However, the real worry is that any prolonged period of national lockdown could bring about a recession and it is at this point the market could begin to struggle.
We know from market data on previous recessions that such an event will cause property prices to drop and with current market conditions and values most similar to that of the previous recession, this could mean a drop of [10%] and upwards, Moss said.
Not only this, but those taking such a hit will be looking at a lengthy recovery time before their property regains its current value, a recovery that could stretch until 2025. That said, a decline in property values would be the preferable option when you consider that for tens of thousands of homeowners, the reality could be the repossession of their home, he said.
With uncertainty and fears around the [pandemic’s] impact on the property market rife, many investors are turning to peer-to-peer lending platforms for a safer option when investing, Moss said.
Not only do they generally offer a higher annual return when compared to most property investment options, but they also allow a lower risk in terms of the sum of money invested, as well as the opportunity to diversify across a number of sectors and options. Something that is always advised, he said.
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