As the Guardian noted yesterday:
Britain's housing market is locked in its weakest August since 2018, as sellers slash their prices in search of a buyer.
New data from Rightmove this morning shows that the average price of a newly-listed home in Britain fell by 2% this month, to £364,999. That's a drop of £7,360, much larger than in a typical August.
The decline means average asking prices are now 1.0% lower than a year ago, as mortgage rate rises in recent months have cooled the market.
What is happening? I suggest that three things are.
Firstly, confidence across the economy is falling. This is reducing house prices.
Secondly, credit may be harder to find in a period of uncertainty. I cannot prove that, but I think it is possible, especially if mortgage valuers are downgrading their reports for these purposes.
Thirdly, at the top end of the market, government economic policy around migration is having a significant impact upon the market, not because of anything to do with tax, but because of the creation of a hostile environment. This is being seen in the highest house prices. The average house price in Kensington and Chelsea, which hosts an international community, apparently fell by £95,000 last month alone. This is a case where impacts do ripple down the market.
What is the overall impact of that?
First, this looks like a sign that the recession I've been talking about is beginning.
Second, it is a sign that nothing the government is doing is affecting consumer sentiment. If Andy Burnham wants to spend his time playing on the peripheries of the issues, this is unsurprising.
Thirdly, the sign is that racism has a price, and it is going to be very real. Falling house prices are not a disaster, but a hostile environment is.
I stress, these are my interpretations, but nothing here suggests to me that anything good is going on in the UK economy or its prospects.
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I dont know whats happened but outside the text block everything is red
I have solved it now, I think.
Oh and my comment instead of being underneath your text is now in the right hand column awaiting moderation
I have no idea why….
I have now removed all the text, cleaned all the code and reinserted it, and it works now
Whilst Ireland has it’s nineteenth century tragedy with the potato blight, it was just over 400 years ago, primarily in the Cartmel Peninsula in what was then east Lancashire, that the last significant famine occurred in England. The weather in the early 1620s was particularly wet and cold leading to crop failure in the then agrarian society within which the poor of the time lived. Over 530 people died of starvation. The poor were unable to afford food and their subsistence crops simply were not there.
Without modern supply chains, flying in tender stem broccoli from Kenya, or rice from Vietnam, the harvest of 2026 which has been awful because of the weather, the opposite of the 1620s, I suspect that famine would be stalking the land this winter. We are blasé about all of this because of the disconnect between what is on our plate and where it actually came from. Whilst food inflation slowed in July, most commentators and a couple of farmers I know here in Somerset warn that prices for food will inexorably rise – perhaps very significantly, affecting all of us, rich and poor and feeding into increased inflation.
It doesn’t matter what your house is “worth” if you can’t afford to eat in it!
Agreed.
I think those price rises will be very real.
And the BoE will respond predictably….
And down will go the value of DC pension pots as asset inflation dies, perhaps abruptly. Today I have been talking to a man who wishes to retire in 12-18 months and he is 97% invested in equities, “because they have done well”. That’s true, but his mindset needs to change from “accumulation” to “decumulation” immediately, and look to preserve the notional value of his DC pot from serious downside risk – an idea he is frankly struggling with. Goodness!
Good luck…
Part of the Kuznets swing? Fred Harrison thinks so:
https://property-accelerator.co.uk/2027-property-crash-expert-thinks-so/
Given that House Prices expressed as a multiple of average earnings are several times greater than the historic post war average and significantly greater than rebuilding costs I suggest that as with the stock market we may be due a ‘correction’ and the consequences may be interesting
Would you please consider an analysis of the threat of AI after the escape of cyber attack bots last week?
I am not very well versed in the issue.
Let me think about it.
I was thinking in particular that about the threat to cybersecurity posed by the recent rogue bots an to the climate by this reckless proliferation of data centres.
I will muse on that, but I am not sure what value I add.
I just read this interesting article on serious problems arising in the US economy and $multibillion losses threatening financial markets. It’s all getting a bit reminiscent.
https://www.wsws.org/en/articles/2026/08/17/gnmb-a17.html
The risks are running very high
There’s a lot of regional variation. Some areas – like parts of South London – have seen decent growth in the last few years. Others – like Torquay – have seen a bit of a decline.
There still seems to be some hang-over from the Covid era. The start of that saw some people chose less centrally located properties while interest rates remained low, pushing up prices in areas like Torquay at the expense of some commuter belt areas. Return to office changes are still continuing, leading to something of the reverse pressure, while the higher interest rates than people had experienced for many years makes larger or second homes less affordable.
Many property owners like myself may not want stagnant property prices, but that would allow prices to become more affordable gradually without putting home-owners underwater. The real risk is a rapid correction in property prices that pushes many newer market entrants into negative equity. That can then make it hard for them to move or to get a favourable interest rate, and leave them stuck with few options and no end in sight.
Interest rates at the moment being higher than inflation suggests a transfer from the poor to the rich, and that’s unwelcome, but rates are arguably not currently so high as to cause an outright collapse. However, the likes of Huw Pill are promoting the idea of higher rates, and to me he either doesn’t recognise or doesn’t care about the damage that the BoE decisions he’s pushing would do to the public.
A tourist visit will not allow you a view of life as lived by the local population. However my recent holiday in Singapore has been very interesting.
Within Singapore’s Westminster style democracy, the People’s Action Party (PAP) have dominated every election since 1955. The resulting ‘benevolent dictatorship by consent’ has clearly been effective if also authoritarian. The population seem to have mostly gone along with this, understanding the principle that you can only protect certain rights by removing others. Broad consent for the death penalty imposed for drug trafficking and serious murders implies the deterrent principle is broadly accepted as positive.
For the tourist, the most immediate example of this is the MRT underground railway. It is so clean that you would believe it was all brand new last week. No graffiti, no dirt, no vandalism, just an effective, dirt-cheap transport system that makes every effort to accommodate the disabled passenger, used by people who are courteous and considerate to each other to a level that shames every other society I have experienced.
The ‘benevolent dictatorship’ principle means that if the government wants something to happen, it does. Government housing, cleaning up the rivers, education, health care are all to a high standard thanks to no opposition idiots complaining about a burden of debt for our children. The transition from 3rd world to 1st world status within a generation for Singapore has occurred at the same time that the UK has done the exact opposite under Thatcher and her followers, Tony Blair and New Labour included.
It may be authoritarian but of one thing I am certain: I’d rather live in a country that denies me the right to chew gum in public than one that allows me the right to carry a hand-gun.
There is no such thing as benevolent dictatorship by consent
That is an oxymoronic term
Sorry – I believe none of it, including the consent.
It’s late summer 2021 and you and your partner have decided to buy a house for £500,000. With your meagre savings and a lot of parental help with your deposit and Stamp Duty, etc. you manage a 15% deposit. You borrow £425,000 over a 30-year term and plump for a 5-year fixed interest rate mortgage at 2%. Your mortgage costs are about £1,815 a month.
It’s late summer 2026 and you now have a daughter and a son aged 4 and 2 – nursery fees are a strain, but grandparents do what they can. The balance of your mortgage is now about £370,500, but your new fixed rate is 5.20%, meaning that the monthly mortgage cost is now about £2,237 – +£422, which is going to really squeeze your discretionary spending.
Over the next five years, house prices adjust by -20% (it’s happened before) and the BoE decide to raise interest rates (for no good reason) to 7%. Your lender adjusts its standard variable rate to 9%. You owe about £300,000 on your mortgage and your house is valued at £480,000. The best fixed rate hovers around 8.95%. You are now paying about £2,730 a month and your partner has just lost their job because of the ongoing recession. You have a problem.
Unlikely? Something similar has happened before and, alas, will surely happen again.
Agreed.
Can I use that data?
fully understand people’s reasons for wanting to buy property, but anyone that can be replaced by software or automation will be lucky to have a job in 30yrs time. I don’t think that what is happening now is just a bad set of coincidences.
In 1988 I bought an ex council house in Worcester just in time to see interest rates rise, property values fall and my outstanding debt rise as I had to move to a deferred interest mortgage to make ends meet. In 1991 I sold the house for 6000 pounds less than the debt I owed to the bank. Not the best of times.
I know many who went through that experience then
The scare stories about AI are more than likely exaggerated. The world will adjust to the new technology. However I am not sure that AI will bring any meaningful benefit to the majority of people unlike for example universal healthcare.
There is probably much in that
Probably, because we cannot know as yet.
As someone working to build AI systems I’m obviously confident that there will be benefits. AI has already displaced some jobs – particularly in translation services, but the existing displacement have not seen mass unemployment.
AI should be considered as another industrial revolution – it will transform certain things, eliminate some jobs, should increase net productivity, and will enable some activity which was not economically viable previously. If previous industrial revolutions are anything to go by, some will be disillusioned by the loss of their jobs, and unfortunately support for those affected will likely be insufficient. In society as a whole, however, there should be overall gains, judging by the path of history.
There are some specifics – loss leaders made replacing junior developers with AI seem financially attractive, and now as those subsidies are reduced a fair proportion of roles are coming back. In particular, while the US may remain challenged by high wages, some attention has shifted towards developers in other countries again.
On something like autonomous driving, there are questions how much the autonomous part can cost and still make economic sense as the current expensive vehicles need a high level of utilisation 24/7 to be cheaper than paying human drivers.
The key risk is of fewer, better paid jobs increasing inequality, but if new jobs are created then society will benefit. Distribution has to be a key focus.