The market could take five years to recover from the Coronavirus crisis after possible double-digit percentage price falls and fast-increasing repossessions.
That’s the bleak assessment of a peer-to-peer lending platform, Sourced Capital, which has analysed property market data from past recessions in a bid to estimate - very crudely - what might emerge from the current crisis.
It suggests that the early 1980s recession lasted for over a year and produced a four-fold rise in repossessions. The platform says the property market nonetheless remained resolute where house prices were concerned at least, with an increase of 8.6 per cent.
In the early 1990s recession, again lasting over a year, prices fell very slightly - some 1.4 per cent - although repossessions went through the roof, increasing more than six-fold. “When the recession ended in quarter three of 1991, it took five and a quarter years for house prices to recover and exceed the pre-peak highs of £58,773” says Sourced Capital.
In the credit crunch of 2008-2009, property prices slumped by almost 14 per cent on average with a 445 per cent rise in repossessions. Sourced Capital says: “As with the recession that preceded it, it took five years for prices to recover to £185,362 in Q2 of 2014, marginally higher than the pre-crash peak of £183,082 in Q2 of 2008.”
So what of the Coronavirus crisis?
“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” explains the platform’s managing director Stephen Moss.
“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 per cent and upwards” he adds.
He believes the recovery may not be complete until 2025.