Anyone reading the news recently will have noticed an increase in reports warning of the potential for house prices to crash soon. Halifax has revealed house prices fell by 1% across the UK last month. The quarterly figure has also dropped again – marking three consecutive periods this has occurred. The drop of 0.1% may not seem significant, but this hasn’t happened three times in a row since November 2012.

Many sources have noted the drop and some are speculating we could be about to see a significant fall in house prices. However, some other experts question whether this is too dramatic. Prices have been stalling, but the volatility (and therefore lack of reliability) of monthly figures can lead to assumptions that may prove to be incorrect.

Why are house prices stalling?

There is still a disparity between household income levels and the rate of inflation. With prices rising and income slow to catch up, this puts daily pressure on home budgets. Many people are understandably finding it difficult to save for a deposit on a home. Others who already own a property and are looking to move up the ladder may not be able to afford to do so yet. With a more muted outlook for the housing market, prices will stall as demand drops. Some people may still want to see what happens with Brexit before making any big decisions about their future.

Furthermore, the buy-to-let market has been hugely suppressed because of new tax laws and stamp duty amounts that have come into play. This too will influence the entire housing market, as fewer landlords will be looking to buy properties to add to their portfolio. Is there a possibility the stalling house prices could be due to this alone, rather than other reasons?

Assessing the future

“The housing market has certainly been more muted of late,” said Darren Pescod, CEO of The Mortgage Broker Ltd. “We’ve seen house prices in London beginning to stall, and traditionally this is where any future trend begins. This may be borne out in the figures we have seen over the past three quarters, as house prices slow.

“However, I don’t think we’re about to see a major house price crash,” Darren added. “Prices will stall, yes, and they may fall slightly in the coming months, but I don’t see any signs of a major price crash soon – not based on the current data. Of course, if the trend continues, that may be a different matter.”

Some sources are talking about a house price ‘correction’, rather than a crash. If prices go too high, the market will naturally self-correct. It may well be the introduction of the new tax laws to cool the buy-to-let market are behind these new figures, rather than any meaningful evidence pointing to a house price crash.

For now, we may simply be seeing a natural change in the market due to the buy-to-let sector. Conversely, we may look back on this moment as a key turning point for house prices everywhere.