The housing bubble, which started to inflate exponentially half way through Covid, due to low interest rates and people moving from flats to houses which had more space and gardens, seems like it is about to burst. 

The main reason why most experts think this is about to happen is rising interest rates.  In December 2021, rates went up from 0.1% to 0.25% and went up three more times until they reached their current level of 1% in May this year (this is the highest they have been for 13 yers).  They are expected to rise even further this year and reach 2.75% by next year. 

The average property last year cost 9 times the income of a full time worker whereas back in 2002, prices were 4.9 times earnings.  This is unsustainable and has been driven mainly due to low interest rates.  As interest rates continue to rise, house prices will continue to fall. 

In addition to people having to pay more on their mortgage and loan payments, due to rising interest rates, they are also having to pay more for food, petrol, clothes, travel, holidays and rent.  The cost of living crisis is crippling people and is another factor which will lead to a property crash.  A new report suggests that around 1.5 million households will be unable to pay food and energy bills this year and 250,000 people will fall into extreme poverty.

Rishi Sunak’s cost of living package will do little to help people and the property market and I fear that nothing can be done to stop the crash and recession which is coming.