10 Years On. Have Leeds property prices recovered from the great financial crisis of 2008?

In 2007-2008 the world saw the worse financial crash in living memory.  It began in 2007 with a crisis in the subprime mortgage market in the United States, and developed into a full-blown international banking crisis with the collapse of the investment bank Lehman Brothers on September 15, 2008. Excessive risk-taking by banks such as Lehman Brothers helped to magnify the financial impact globally. Massive bail-outs of financial institutions and other palliative monetary and fiscal policies were employed to prevent a possible collapse of the world financial system. The crisis was nonetheless followed by a global economic downturn, sometimes referred to as the Great Recession. The European debt crisis, a crisis in the banking system of the European countries using the euro, followed later.

Stock markets world wide dropped and housing markets followed. Housing markets often follow major stock market cycles as the knock on effects are played out with property being much more illiquid than most other assets. Unemployment levels increased, evictions and repossessions rates soared.

So what happened to UK property prices?

The picture varied across the UK but the average fall according to Nationwide was 15.9%. The highest recorded fall was in Northern Ireland at a massive 34.2% and the lowest being Scotland at 8.1%. By the middle of 2008 property sales volumes had halved to their usual level as confidence levels hit rock bottom.

So what about Leeds property prices?

Like everywhere else in the UK, Leeds showed little immunity to the crisis. Although many towns and cities were hit much harder, property prices in Leeds fell by around 11% on average in the space of just 18 months with prices bottoming out by the end of 2008/early 2009.

The picture varied somewhat however from suburb to suburb and also between different property types.

The worst affected properties in Leeds were new build flats and also HMO’s which were often severely over valued in the few years running up to the crash.

There was a glut of flat building in Leeds both in the city centre and the suburbs pre-crash, particularly between 2005-2007. These flats were being sold off plan by large and small scale developers at over valued prices, yet they sold in great numbers. Many flats had been bought by investors and hundreds of flats hit the rental market around the same time. This competition for tenants combined with rising unemployment rates meant that many flats remained empty and some investors began to fall behind with their mortgage payments.

Following the crash some of these flats were being valued for an unprecedented 30-40% less than what their owners had paid for them less than 2 years prior! Estate Agents were known to decline to list flats unless the Vendor’s were extremely realistic with the valuations since they knew they wouldn’t sell otherwise. Business for Estate Agents hit dangerous levels as transactions fell sharply. Some disappeared, most had to turn to lettings (which was mostly thriving, as it often does during recession times) for the first time to pay the bills. Auction houses on the other hand began to experience a boom they hadn’t seen before as investors began to take advantage of market conditions.

HMO’s were often being valued commercially by a multiplier of rent, rather than the bricks and mortar value of the property. This often meant the valuations approved by lenders pre-crash were in some cases up to double what they were worth post crash! Many of these properties were 2 or 3 bed terraces that has been bought to develop into 5 or even 6 bed HMO’s around Burley (LS4) and Headingley (LS6) for the purpose of being sold on for large profits. They were often bought by investors seeking high returns in the thriving student tenant market. The bubble burst quickly however and this quickly became a disaster for these investors, many of whom are still well into negative equity today.

Leeds property prices today

The good news is that, on average Leeds property prices have mostly recovered and are higher than they were before the crash. The average Leeds property price (all properties, all postcodes) is now £212,113 up £43,636 – a 25.90% uplift in the past 10 years**.

Let’s look at a few notable Leeds postcodes for the past 10 years**:

  • LS1 – Current average value £207,247 up £41,540 +25.07%
  • LS4 – Current average value £180,529 up £37,559 or +26.27%
  • LS6 – Current average value £246,020 up £50,738 or +25.98%
  • LS12 – Current average value £121,236 up £27,701 or +23.98%
  • LS13 – Current average value £148,411 up £27,811 or +23.06%
  • LS17 – Current average value £265,110 up £72,182 or +27.09%
  • LS18 – Current average value £236,461 up £65,092 or +28.28%

You can see from this that Leeds has made a healthy recovery which is fairly even throughout it’s towns and suburbs.

If you would like any more information, don’t hesitate to get in touch.

 

Sources:
*Wikipedia
**Property price data: Zoopla