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Letting some air out of the property balloon…But let’s not get carried away while we do it


According to the Halifax (and they should know), UK house prices fell for the fourth month in a row last month: hard on the heels of a 2.4% mini-slump in November, December chipped another 1.5% from the foundations of every Englishman’s (and woman’s) domestic castle. The aggregate fall in prices since last September is now running at 4.4%, and if that doesn’t sound a lot in the greater scheme of things, bear in mind 4.4% of £296,000 (the average property price in England) is £13,024: that’s more than a third of the average annual UK wage, lost in the space of four months. At that rate, Britain’s property owners will be working for nothing before the year’s out…and the long term doesn’t look much brighter either, with Nomura predicting a 20% slump in UK property prices by the end of 2030 (


A Bubble we can’t afford to burst

But, of course, this sort of price realignment is only to be expected: especially given domestic real estate markets have been running super hot in Britain for the best part of thirty-five years, with the single exception of the period immediately following the financial crash of 2008 (when prices fell by 15%). Other than that though, it’s been pretty much upwards all the way, with the average sale price rising from £50,000 in 1990 (those were the days) to £250,000 in 2020, according to UK Land Registry data ( And a bubble that big has to have some of the air taken out if only to avoid the entire sector crashing and burning (which it very nearly did in 2008). Hence the reasonably radical price adjustments we’re seeing at the moment, which we’re likely to continue seeing for the foreseeable future.


So this is the plain, unavoidable truth: every market has to be allowed to find its own level, and we’re witnessing the property market doing that for itself. Indeed, as the Senior Property Analyst at Capital Economics put it last week (, “…the house price correction is even further advanced than we previously thought”…Out of the mouths of babes and property analysts, as we might say… 


Property’s Uglier Cousin

And, of course, whilst we’ve all been happy to strike up a lifelong romance with the home we call our own, it was always much harder to love the limping malevolence of its uglier cousin: interest rates. Barely noticeable when property prices are riding high (see above) but as painful and persistent as a bad toothache when prices are coming down (see above again). And goodness gracious, how that interest rate ache is starting to tell for UK borrowers…


Over the course of last year, the Bank of England raised interest rates on no fewer than nine occasions, primarily with the intention of getting hold of runaway inflation but also to buttress the economy against what it currently predicts will be the longest and most sustained recession for more than a hundred years. Any given number of the hundreds of thousands of borrowers recently coming to the end of their fixed rate terms will have seen their interest burden spike sharply from 2% to 6%: mostly, it’s fair to say, because of the tragicomedy of Mrs Truss’s Mini Budget, but even as the comedy fades, the tragedy lingers on…the Bank of England is expected to announce at its MPC meeting on 2 February that rates will go up for a tenth time in twelve months (


Those higher interest rates (astonishingly high by pre-pandemic levels) have also started to deter UK-based construction companies from making a start on new projects, and when you think about the number of those who are either currently homeless or in severe housing need in Britain, that’s little short of a tragedy as well.


A World Outside our Window

But as we’ve had to say more than once on this platform recently, there’s a whole world beyond the woes currently bedevilling UK property markets, and, for India in particular, a real cause for optimism.


On the subcontinent, marginal property prices are projected to rise by up to 15% over the near term, driven ever higher by unprecedented levels of demand from a burgeoning and increasingly affluent population. It is no surprise that JLL is reporting that India is going through its strongest real estate surge since the heady days of 2014 (


And the lesson from all of that…well, it’s this: when it comes to investing in real estate, it always pays to think laterally…some balloons don’t need any air taken out of them because they’re still being blown up.


Executive Overview

There couldn’t be a starker contrast between the UK and Indian property markets at the moment…so it certainly pays to think globally in these stubbornly local times.


Red Ribbon India Real Estate Fund

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Red Ribbon India Real Estate Fund is a multi asset class closed-end fund registered in Luxembourg offering investors the opportunity to participate in Growth and Emerging Markets and Mainstream Impact Investments, such as India, that offer returns rarely available in western markets.

Suchit Punnose

Suchit Punnose / About Author

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