The UK housing market in a post COVID-19 world: will history repeat itself?

  • Gary O'Connell
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Real average house price changes during economic recessions and flu pandemics

The UK housing market in a post COVID-19 world: will history repeat itself?

Our Director, Gary O’Connell, and Consultant, Ivan Brodrick, consider the impact of COVID-19 on the UK Housing market.

Speculating on the housing market has long been one of the nation’s favourite pastimes, with events such as the Global Financial Crisis and the 1990s Housing Crash providing a reminder of the long-term impact of significant downturns. Many articles have been written in the current crisis that have drawn parallels and pointed to similar housing market outcomes for house prices. However, much of the commentary has been predicated on the assumption that pandemics and economic shocks are one and the same. This piece aims to consider this issue by examining UK house prices in the 20th and 21st centuries, comparing the impact of pandemics with other economic crises, in order to ask the difficult question – what will be the impact of COVID-19 on house prices?

Similar pandemics to COVID-19 have occurred in the last century and they can be used as an indication of what is to come. The phrase ‘history repeats itself’ may not hold true all of the time, but the probability is that house price impacts will fall within the realms of previous experience.

A History of Real House Prices in the UK (1900-2020)

A history of house prices in the UK

Graph 1: average real house price in the UK between 1900 and 2020.

Over the past century there have been several major recessions and pandemics. This analysis will focus on eight of these – four economic downturns and four pandemic events.

Economic events:

  1. The Great Depression (1929-1933) – UK housing data.
  2. The mid-1970s recession (1973-1975) – UK housing data.
  3. The early-1990s recession (1990-1991) – UK housing data.
  4. The Great Recession (2007-2009) – UK housing data.

Pandemic events:

  1. The Spanish Flu (1918) – Swedish housing data; WW1 neutrality enables more reliable data interpretation compared to the UK, USA or other European countries.
  2. The Asian Flu (1957-1958) – US housing data; the US was the most affected developed country.
  3. The Hong Kong Flu (1968-69) – UK housing data.
  4. SARS (2003) – Hong Kong Housing Data; Hong Kong was most affected, and several studies have been done on the reaction of its housing market following the pandemic.

Housing data from the specified countries was compiled for the four-years following each respective event. They were rebased to 100 at year zero (the year before the event in every instance) to show the comparative subsequent price trends. The results of this analysis are shown in Graph 2, with economic events shown in blue and pandemic events shown in orange.

Real Average House Price Changes During Economic Recessions and Flu Pandemics

Real average house price changes during economic recessions and flu pandemics

Graph 2: house price reactions.

Graph 2 displays a clear trend in house price reactions. Three of the four economic events resulted in 20-30% drops in real national house prices, whereas three of the four pandemic events showed increases in real prices, with only USA housing data showing a modest 4% decrease in prices after the Asian Flu outbreak. The Great Depression is the lone outlier with a 3% increase in house prices. Swedish house prices achieved a 12% increase following the Spanish Flu and Hong Kong saw the biggest housing boom with a 33% price increase during and following the SARS outbreak.

To demonstrate the trends of the two events more succinctly, Graph 3 below shows the averages of the respective groups.

Real house prices during economic recessions and pandemics

Graph 3: average reactions for economic recessions and pandemics.

Many factors help explain the stark difference between these two indices, but the biggest consideration is likely liquidity in spending. In economic events consumer confidence is drastically lowered in the face of high interest rates, inflation or reduced wages and access to cash. Most importantly, value is eroded, and people are unable or unwilling to spend money, producing sustained liquidity drops that can plague the economy for years. Contrastingly, pandemic events do not tend to erode value or consumer confidence at the same level, but instead shutdown or seriously constrain marketplace activity. However, this shutdown is temporary in nature and spending tends to continue close to ‘normal’ levels when markets are re-opened. When SARS hit Hong Kong in 2003 property transaction volume reduced by 33-72% but house prices fell by only 1.9% at their worst; a phenomenon explained by a ‘wait and see’ approach implemented by sellers. Current housing markets in China are already following a similar path with a near-total shutdown in volume during the peak of coronavirus, but with no visible effect on prices to date.

Closing Thoughts

The purpose of this article is not to speculate a forward-looking house price index projection. It is, instead, to look at historical house price movements in the face of economic-driven events versus pandemic-driven events and examine the respective performances. History demonstrates that pandemics alone do not cause housing corrections, and based on current ways of working et cetera, there is no reason to believe this pandemic will run differently to historical events. However, this analysis does not and is not meant to show the potential impact on the housing market that the pandemic could have when coupled with the distress in the wider economy, including but not limited to, Brexit, long-term stagnant real wage growth, poor productivity, crude oil price fluctuations, the impact of government stimulus and the impending climate emergency.




[1] Bank of England research datasets (2016): A Millenium of Macroeconomic Data; spliced HPI, deflated at CPI.

2016-2020 updated from ONS HPI, deflated at CPI.

[2] Samy, Luke (2015): Indices of House Prices and Rent Prices of Residential Property in London, 1895-1939. University of Oxford.

[3] Offer, Avner (2010): Property and Politics 1870-1914; Landownership, Law, Ideology and Urban Development in England. Cambridge University Press.