Will UK house prices crash?

The financial media is now speculating that UK house prices will crash.

I'm not so sure - here's my take on where things are.

Firstly houses are there to be lived in.  With waves of immigration (both legal and illegal), there are millions more people in the UK now than 20 years ago.  They all need somewhere to live.

Although Angela has promised to build millions more houses, this has yet to materialise.

So currently we have a supply and demand problem.  There are too few houses for too many people.

When there is more demand than supply then prices tend to rise.

Although house price growth is slowing it is not falling. In part there was a flurry of sale activity in Q1 2025 in order to beat Rachel's stamp duty increase.  This ultimately resulted in the April's GDP number showing the UK economy contracting as legal service fees for conveyancing plummeted in April once all the deals had been closed in Jan-March.

The housing market is not really a single market.  We are seeing Landlords exit the rental market due to Government policy, excessive taxation and excessive regulation. These properties are generally becoming owner occupiers and not new rental properties.

This means rental prices are increasing and many tenants are fighting for fewer-and-fewer rental properties.

Not every tenant can afford to buy (or wants to) - that's why they rent.

So expect rents to rise steeply.

The government is also trying to solve the asylum seeker hotel problem.  However their approach is causing rental prices to rise.  Councils are actively encouraging landlords to evict tenants and hand their property over to companies like Serco who will pay guaranteed top level rents for 5 years.  They will house asylum seekers in the houses rather than hotels. This is pretty much like a 5 year bond for investors. 

Morally I have a problem with this.  It's making tenants homeless and prioritising asylum seekers over citizens. This then exacerbates the situation as there are then fewer rental properties so rents will rise further as properties will be locked out for 5 years.

However the logic for investors is sound and if the government wants to penalise Landlords then this is an easy exit for landlords.

Back to house prices. My observation is when interest rates are high, investors tend to sell property and when interest rates are low investors tend to buy property as it yields a better return.

OK the government has made property a less attractive investment but the logic has not changed.

So interest rates have risen significantly following decades of artificially low interest rates however we are now seeing interest rates start to fall in order to prop up the economy following Rachel's tax raid on business. 

The odds on a recession are pretty high so the outlook for further interest rate cuts is pretty high.

 ING bank expects two more interest rate cuts this year, coming in August and November.

Here's the Bank Of Englands summary

In August 2024, we cut the interest rate from 5.25% to 5% in November, we cut it from 5% to 4.75% in February 2025, we cut it to 4.5% and, in May, we cut it to 4.25%

The Bank Of England is pretty much saying the economy is in bad shape despite inflation.  We are entering a period of stagflation.  High inflation - low growth.

The pound is looking weak against the EURO falling from 1.19 on 28th July 2024 to 1.15 on 28th July 2025. The pound has strengthened against the Dollar in the same period from 1.29 to 1.34

Gold prices have risen from $2,400/oz to $3,400/oz over the same period.

So investors are looking for safe store of value. If interest rates are falling and inflation is rising then you need to invest in something to isolate from a weak currency.

That could mean property.