Property prices falling at their “fastest rate in 14 years” sounds alarming and there is no denying the factual accuracy of the Nationwide’s headline.
But just step back a moment. The story could easily be rewritten “house prices stay close to all-time highs”.
Yes they have nudged down 3.8% in the past year according the building society’s tally. But that is very modest compared with previous recent downturns. During the global financial crisis a decade and a half ago they were falling at an annual rate of 15% or more.
Further back in the early 1990s year-on-year declines were also in double digits. Equally the upswing was much more dramatic when prices recovered.
But London there has not been a swing in either direction of more than 10% since July 2016, when prices rose by 10.17%. So why has the once notoriously volatile UK property market become so much calmer?
It probably has a lot to do with two trademark features of the British economy since Brexit: full employment and stagnant wages. As Nationwide said today, there is little prospect of an all-out crash while the jobless rate remains below 5%.
Homeowners will prioritise paying the mortgage over almost everything even in the toughest times, so long as wages are coming in. But while those salaries are not rising much — certainly in real terms — there is little scope for buyers further bidding up already elevated prices.
The result — so long as full employment remains intact and earnings do not take off — is that the market will, with luck, avoid the messy and economically disruptive hard landing that everyone fears
