Sell and Rent Back: Recessions & House Prices
Panic in the house market with the latest figure showing
house prices are down 17.6%. However history tells a different story
and says no need to panic it is a curve in the charts that will reverse.
House prices in the UK have had some downturns over
the years. For example between 1952 and 1953 there was a fall of 1%,
again in the 90s we had a big fall, where the average house price
went from £59,587 to £51,050 a 16.72% fall between the
first quarter of 1990 and the third quarter of 1993. Again in the
second quarter of 1994 a 1.1% fall was registered along with some
others. But what does history tell us?
History tells us that never we have never had a fall
in house prices over a ten year period. See the figures:
The biggest upturn was in the period from 1972 to
1982 where the increase reached the amazing figure of 224.60%. This
is proof that the sell
and rent back plus buy back is an excellent option in times of
crisis. The property will be sold below market value but the buy back
option will also be below market value. Looking at the chart above
the homeowner who opts to enter into this scheme will be highly benefited
when buying the house back.
In the last recession – 1990-92 – house
prices went down 16.72% as mentioned above. However, if we look at
the figures between that recession and now we will see an increase
of 147.95% in houses prices. The average price in 1990 was 59,587
and now is £147,746.
The 1980-82 recession didn’t affect the property
market and it even showed an increase of 12.80% in house prices in
this period. From an average price of £22,667 in the first quarter
of 1980 to £25,580 in the fourth quarter of 1982. Again in 1973-75
the house market was untouched registering an increase of 33.73% in
house prices.
An indicator that the house prices are going to increase
again is the fact that the construction industry has had a big slowdown.
The demand for houses in a few years time will be more than those
on offer causing prices to go through the roof again. So if you are
entering into a sell
and rent back plus buy back make sure you pre-agree the purchase
price to make it work smoothly for you.
What is a recession by the way? Everybody is talking
about recession now but do we really know what it means? The only
thing known for sure is the painful feeling in our pockets. Recession
is a decrease in a country’s gross domestic product (GDP), which
is a measurement of the country’s national income and output
– a measure of all the country’s services and goods. It
is used as a thermometer to check the economic health of a country.
The calculation of the GDP is a quite complex but the basically the
economists either add up all the income of the whole population or
alternatively the total expenditure. The expenditure method is the
more commonly used and includes investments, private and government
expenditures, net exports and total consumption. Every 3 months the
GDP is calculated and if declining for two consecutive quarters it
is officially a recession. When the GDP drops by 10% or a recession
lasts for more than 3 years it is officially a depression. In 1919-21
it lasted 3 years and had a GDP down by 10.9% and was similarly followed
by the Great Depression of 1930-31.
We are coming off a 10 year boom especially orchestrated
by an irresponsible financial bonanza which has brought Britain into
a recession that families will pay for with their homes through repossession
and near poverty through the astronomical unemployment
rates. To secure homes in these trying times it is wise to seriously
consider the sell and rent back plus buy back scheme. Let’s
hope that this recession doesn’t last long and that the collateral
effects won’t wipe out the gains made during the last ten years.
