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Why Charlie says house prices will fall by 35%

In this week's podcast, Daniel and Anthony are joined by the homebuyer's advocate Charlie Lamdin. In this episode, we explore, discuss and debate Charlie's view that house prices will fall by 35% before they level out.

Why house prices will fall by 35%

The thrust of Charlie's argument is that high house prices, rising mortgage rates, and a cost of living crisis have effectively shut first-time buyers out of the UK housing market, reducing the demand for housing. Therefore, those wanting to sell to a first-time buyer will need to adjust their pricing expectations.

Charlie also believes that returns are so low in the amateur buy-to-let market that many landlords are seeking to exit the market, because rents are no longer covering their costs and such 'forced' selling will need to be priced to go.

Those remortgaging in the next few years will be seeing significant increases in their mortgage payments as we leave the age of low-interest rates behind. If we add higher higher mortgage costs to the increasingly higher costs of living Charlie suspects that many may need to sell in order to reduce their outgoings.

He also believes that overseas buyers are also sitting on the sidelines as they believe that house prices will fall.

Charlie is not saying by when house prices will fall by 35%, but that the peak to trough fall will be in the region of 35%.

Why house prices won't fall by 35% Anthony takes a different view to Charlie. At the start of the Global Financial Crisis, I predicted that house prices would fall by 30% to reach benchmark affordability, where mortgage payments equated to 30% of the mortgage holders take-home pay.

The peak-to-trough fall in house prices was 19%. Anthony was wrong, despite the years of austerity, house prices troughed in April 2009. In Anthony's view conditions had never been better for a housing market correction than during the 'Global Financial Crisis', if it didn't happen then, Anthony finds it difficult to say it will happen now.

It won't be different this time

The podcast has a lot of charts, so please watch the youtube version for the full experience. In the video, Anthony looks back at the history of house prices and by going back in time we look at every time all the ingredients for a house price crash were ready and in place. The upshot is that the expected crash didn't materialise.

Housing transactions are likely to fall and this takes some of the downward pressure off house prices, supply stepping back as well as demand.

Anthony's own view is that house prices will be 8-10% lower at the end of this year than at the start, a view based on long-run growth rates and the impact of inflation on asset prices. High inflation is bad, but it also leads to wage rises. If wages rise we can borrow more, and if we can borrow more we usually do and borrowing more underpins house prices.

What do you think? We'd love you to watch the video and let us know what you think!


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