The biggest house price myth

Some housing `gurus' believe that certain parts of the UK are crash-proof. This hard evidence proves otherwise!

In the late Eighties, UK housing values rocketed, with prices in most regions reaching a peak in mid-1989. The housing crash which followed was pretty brutal for some homeowners, as I covered in How Bad Was The Last Housing Crash?

In the Nineties' house-price crash, the average UK home lost an eighth (12.5%) of its value. However, seven of the UK's 12 regions did much worse than the remaining five in their fall from top to bottom, as my first table demonstrates:

The Nineties' crash

Source: Halifax House Price Index

As you can see, the regions where house prices held up best were the West Midlands, the North, Yorkshire & Humberside, Northern Ireland and Scotland. Indeed, in the latter two countries, there was no sustained decline in housing values at all.

Now study the regions at the top of our table. East Anglia boomed and then collapsed equally spectacularly (-34%), once the exodus from London to the Fens ended. The UK's most affluent areas -- Greater London (-28%), the South East (-31%) and South West (-29%) -- also suffered much steeper falls than the UK as a whole.

In my view, this disproves the housing myths of 'fortress London' and the 'safe Home Counties', as prices plunged very steeply in these areas.

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The Noughties' crash

After rising incredibly sharply from 1995 to 2007, house prices across the UK reached a peak in the summer of 2007. After this, they fell at an even faster rate than in the Nineties' crash.

In most regions, house prices peaked in the second or third quarter of 2007, before diving until the second quarter of 2009. Here are the regional falls from peak to trough:

Source: Halifax House Price Index

As you can see, the areas with the lowest house-price falls are Yorkshire & Humberside, the North, the South West and Scotland. Although the Scots dodged the Nineties' crash, the Noughties' crash has seen price drops north of the border of almost a fifth (18%).

At the top of our table is Northern Ireland, which completely side-stepped the previous crash. Alas, the Noughties' slump hit the Six Counties for six, with prices falling by almost half (44%). Crikey!

Once again, these figures disprove the myth of London and the Home Counties being resistant to house-price crashes. Indeed, prices in Greater London fell by more than a quarter (26%) and prices in the South East fell by almost a quarter (22%). Both regions suffered steeper falls than the UK average of -21%.

So much for being 'crash-proof'.

Follow the hints and tips in this goal: Sell your home

No immunity from future crashes

In summary, if you believe your local area is somehow magically 'immune' from house-price falls, then please think again.

As the English poet John Donne famously wrote, "No man is an island, entire of itself; every man is a piece of the continent, a part of the main." The same goes for house prices, because no region escapes the inevitable downturns.

There's little doubt that prices fell in your neighbourhood in the crashes of the Nineties and Noughties. What's more, they will tumble again when Part II of this housing crash kicks off later this year...

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