THE media reports that Portico, a London estate agent, is warning that a new property crash is on its way thanks to decreasing property sales in London. What does that mean for your home insurance?
You can read all about the warning on Property Industry Eye. Basically it says that house sale transactions in Westminster are half than they were 12-months ago and at the same point the prices started to tumble in 2007. It also says that where London leads the rest of the UK tends to follow in property sales terms.
The assumption is fair but flawed in my mind. Yes, the capital is reeling from stamp duty changes that hit properties over £1million the most. Yes sales are down from what is undoubtedly a hot spot for property prices. But no, this does not mean the rest of the UK will hit a property recession.
You see, when the recession took hold in 2007 and property prices fell, they did across the UK to much lesser an extent in London. In fact, I would argue that London bucked the recession and prices started rising faster and higher than anywhere else in the UK. Now I expect the reverse to happen in 2016-2018.
London is out on the edge of a bubble all by itself. Prices will fall there, but probably not by much as demand remains high. The national house price index will show a drop because London is so influential. But for the rest of us in the regions, we are unlikely to feel much of a change at all.
Since 2007 house prices in the North East, Midlands, Wales and other counties have pretty much tread water with small rises or drops. It’s the opposite of London. And they will continue to do so as London peaks and troughs. So the whole national house price debate is fairly fruitless now unless you are a Londoner who is thinking of buying or investing right now.
House price rises and falls do not have any influence on home insurance. The price of the house is immaterial to the fact you need home insurance or how much it costs to buy.
The cost of home insurance is based on the rebuild value of the property and the replacement cost of the contents inside. With inflation tipping towards deflation right now, the cost to rebuild properties is pretty much the same as a year ago – it is the cost for materials and builders to rebuild the property.
Contents replacement is particular to each property and dependant on what you own, so nothing to do with house prices either.
So the good news is that home insurance should remain a constant in periods of house price rises and falls. That is around £200 for the average house in the UK. Get a quote today at The Property Insurer.