House prices are likely to experience a sharp slip as the UK sits in a double dip recession.  Historically after a recession sets in there is a decline in house prices.  The lack of confidence in the economy often leads to buyers holding off committing to a property and mortgage debt.  The thought is also considered that house prices will likely fall giving them a chance to buy at a lower price.

Economists are warning that there could be a further decline in the house prices with Capital Economics offering a prediction of a fall of 5 per cent this year. 

Paul Diggle, property consultant with Capital Economics, said, “Each of the previous recessions in the UK since 1955 were accompanied by at least some decline in real house prices. But there are reasons to expect nominal prices to decline over the next few years as well.

“Because in the past inflation has been high, often house prices could fall in real terms but continue rising in nominal terms. But this time it’s unlikely to happen.  Our underlying view remains that housing remains overvalued and due further falls.”

Because buyers may be weary to purchase due to reports of expected declines in house prices, the impact could be that house prices decline even more.  This leaves house sellers in turmoil as they face a market where aggressive pricing wins the buyer and there is a lack of first time buyers looking for starter homes.

Homeowners not expecting to move home but in search of a remortgage are also being impacted by the decline in house prices.  As house prices decline so do property values which erases built equity of homeowners.  Without adequate equity, homeowners are out of reach of what would have been an easy remortgage had equity been available to meet current loan to value levels.