The Impact of Coronavirus on the Property Market vs. the 2008 Financial Crisis

Considering the severe economical ripples that the Covid-19 pandemic already seems to be causing, what will the fallout be in the long run – and how will this compare to the most severe financial crisis in recent memory – the 2008 financial crisis?

Of course, the coronavirus pandemic is still very much in progress, while the damage resulting from the 2008 recession occurred more than a decade ago.

In this article, the real estate specialists at Property Solvers examine the impact of the 2008 crisis on the property market and compare it with the potential outcomes of the new threat.

The 2008 Crisis

The cause of this recession is often linked to the growing rejection of risky “subprime” mortgages in the US, resulting in market instability.

Several major mortgage lenders folded, creating a knock-on effect which saw ratings on bonds significantly reduced and house prices plummeting.

Despite hitting its highest figure in 2007, the Dow Jones then gradually lost half of its value, causing significant losses within the stock market which radiated across global financial markets – particularly affecting the US and Western Europe.

Over the most significant 16 months during which the UK was in the grip of this recession, property prices fell by 20%. Interest rates stood at 5%.

Stock market analysis

The market slowed massively as a result and took more than six years to return to normal.


While the current pandemic has no roots within the stock market or mortgage lending, there is a very real threat that this crisis may cause a similar financial impact.

While the UK government has instructed the Bank of England to keep interest rates low – and, indeed, they currently stand at 0.1%, there has also been a freeze on mortgage lending. The property market in general, along with development and construction, has slowed significantly.

This is in no small part due to the UK government’s appeal to individuals and businesses to cease all non-essential activity and movement.

Many landlords, too, have announced rental payment holidays to support tenants who have lost work as a result of the pandemic. Some lenders have also agreed to mortgage payment holidays.

While these are some of the key aspects that are likely to impact the UK property market in the months – or even years – following Coronavirus lockdown, we are still in the midst of this crisis and the long-term effects are currently difficult to predict precisely.

Knight Frank predicts that house sales will fall by around 38% when compared to 2019’s market. Prices are likely to gradually tumble by 3% throughout the year in every UK region but Central London. The Royal Institute of Chartered Surveyors (RICS) have also commented that a large number of its members believe house prices could fall over the next 12 months.

Rising property prices concept

However, it is thought that 2021 will see a gradual rise in property prices. The extent of this will depend on the length of time spent in lockdown and the average financial status of members of the UK public when measures are lifted. As we wait to see how things transpire, there may be some homesellers that seek quick cash sales but most would be in a flexible enough position to wait.

2008 and Coronavirus – A Comparison

Thus far in 2020, property prices have not plummeted to the same levels as they did during the 2008 crisis. Many consider the market to be frozen in stasis rather than falling – much as it was during the period of uncertainty surrounding Brexit.

In 2008, the UK population experienced significant losses of income, increased unemployment and raised levels of debt. All of these are also likely results of the Covid-19 pandemic.

However, with government resources focussed on the containment and eradication of the virus, and with no evidence of a reduction in measures occuring any time soon, it may be difficult to measure the precise effects of these factors.

The push to keep interest rates low represents a key difference when comparing the current situation with that of the 2008 crisis, and is likely to be beneficial when it comes to market recovery.

The fall in property prices has also been far less significant to date – although it is hard to determine whether this will remain the case should the UK’s lockdown continue beyond the beginning of June.

Man in a city centre apartment

The chief difference between records of the 2008 crisis and the information we are currently able to gather about the financial effects of Covid-19 on the property market is the power of hindsight.

As more than a decade has passed since the recession, the government has been able to collect data and undertake clear measurements. As the current pandemic is still ongoing, the data sets are not complete and will not be until matters are resolved.

While non-essential operations remain suspended and social distancing stays firmly in place, there is very little chance of progression or growth within the property market.

The sooner these restrictions can be safely lifted, the more quickly and effectively efforts can be made to restore activity and see improvements – whether minor or significant.

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