So what is the silent property crash? If you’ve been following the housing market, you might have noticed that house prices have been relatively flat or slightly declining in some areas over the past year. Meanwhile, general inflation has been skyrocketing until the last few months. This disparity has significant implications for real house prices, when you adjust them for inflation.

When we talk about real house prices, we mean the value of properties after accounting for inflation. Despite nominal house prices appearing stable, the reality is that their real value has been decreasing substantially. This decline is not immediately obvious because it doesn’t make headlines or grab public attention like a sudden drop in nominal prices would.

Here’s why this is happening: inflation affects the purchasing power of money, meaning that if inflation is high, the real value of assets not increasing at the same rate effectively declines. Over the past year, while the price tags of homes haven’t changed much, their value in terms of purchasing power has decreased significantly. For example, if inflation is at 10% and house prices remain flat, the real value of those homes has effectively dropped by 10%.

This phenomenon is often overlooked because it lacks the dramatic flair of a market crash. A sudden drop in house prices is a tangible event that everyone notices. However, a steady decline in real value due to inflation is more insidious and less immediately apparent, even though its impact on wealth and purchasing power is just as significant. This is just another reminder to clean-up your information diet – stop listening to the mainstream media and instead seek out trusted sources and experts.

For property investors and homeowners, this silent crash means that their assets are losing value in real terms. It’s crucial to consider this when making investment decisions or evaluating the health of the housing market. While nominal prices might suggest stability, the real story is one of gradual erosion of value. Recognising and understanding this silent property crash can help investors make more informed decisions and protect their investments against the stealthy effects of inflation.

Finally, there are pros and cons to everything – high inflation also erodes the value of any debt you have, which is a great thing (I did an article on this recently). Swings and roundabouts…

Married2Property are a family-run property company that aims to create social good through property.

These articles are written by Darren de Wal based on his experience as an active Property Investor since 2012 and 16 years getting to a senior leadership position as an Officer in the Royal Air Force. They are for the benefit of those with a general interest in Property, as well as those wishing to start out investing themselves.