Housing Market North East

The North East housing market has experience rapid growth in the past 10 years. House prices are still lower than elsewhere in the country; however, the gap between the north east and average UK house prices is narrowing.

Areas such as Newcastle are witnessing significant regeneration, housing is often a key to this regenerations.

For example, Bridging Newcastle Gateshead is one of 9 projects to create new, better homes in the north east. BNG is supported by the government and has received funding of £65 million to subsidies a 15 year programme. The purpose is to create great places to live in an area covering around 77,000 properties in Newcastle Gateshead.

Low Demand Housing

Despite rising house prices, pockets of Newacastle and the North East are characterised by low demand housing.

Low demand housing is predominantly in areas deemed unsuitable, unsafe; therefore, despite low prices demand for these houses remains low.


Areas of low demand housing are characterised by higher crime rates and high unemployment levels. They are often associated with the high rise tower block, built in the 1960s.

Therefore, the challenge for housing in the north east is not just to build new houses but replace the majority of the low demand housing. It is hoped that through schemes such as BNG residents can be incorporated into the planning process; it is hoped this will create more desirable areas to live, without the problems of the past.

Are House Prices set to Fall in the North East and Newcastle?

The rise in house prices in the North East, is mainly based on demand outstripping supply. The forecast for future house prices in this area are fairly similar to the rest of the country.

• Will House Prices fall in UK?

UK House Price Growth Slows

A new report by Hometrack shows that UK house price inflation is continuing to fall. House price inflation has now fallen to 6.7%

This is still higher than the rate of inflation (2.5%) however, it shows that the recent interest rate rises are starting to have an effect. Also, there is an increased number of first time buyers who are unable to afford house prices. House prices in London continue to rise at the fastest rate in the UK, with prices rising by 1.3%

The average cost of a home in England and Wales increased 0.6 percent from April, the least s

Today's Hometrack report, which is based on a survey of 3,500 real-estate agents, showed prices rose 6.7 percent from a year earlier. The number of buyers registering with a real- estate agent didn't increase on the month while the volume of sales rose 4.3 percent, less than half the pace of April, Hometrack said.

see full report at Bloomberg

Will London House Prices fall in 2008?

Evaluate whether House Prices in London are likely to fall in 2008?

London House Prices have doubled in the past 6 years.


Reasons why London House Prices may Fall?

1. Interest rates have been increased 4 times in the past 9 months. This increases the cost of mortgage repayments, making it less attractive to buy. Although, the interest rate has only increased by 1% it is still quite a significant factor. This is because:

• To get on property ladder first time buyers have borrowed a high income multiple. Mortgage payments are a high % of disposable income, therefore, a small rise in interest rates causes a big reduction in disposable income.
• Increasing number have interest only mortgages. This means that they are more sensitive to interest rate changes.
• Interest rates may rise further. This is because the bank is committed to reducing inflation closer to 2%

2. House prices have risen faster than income.

This means it is increasingly difficult for first time buyers to get on the property ladder. Many houses are now out of reach of key public sector workers.

3. Speculation.

The London housing market has seen foreign investors buying houses to try and make capital gains. If house prices slow down or even start to fall they might sell to cash in on their gains. The London housing market is more volatile than the rest of the country, swings in house prices tend to be more extreme; this is partly because supply is very inelastic.

4. Downturn in the Economy.

A slowdown in economic growth will lead to lower bonuses and smaller wage increases. Therefore, city workers will be less willing to spend extravagant sums on expensive housing. The economy may slow down as a consequence of rising interest rates, and slowdown in housing market


Why House Prices in London May Continue to Rise:

1. Prices have risen because of economic fundamentals. Demand has been increasing greater supply. In London, there is a fundamental shortage of housing.

2. Supply very inelastic in London. Rising house prices have not led to increased homebuilding, because there is a shortage of space to build houses.

3. Demand has been rising for various reason:

Demographic factors - increased number of households.
Rising number of households due to more single people; e,g old people and higher divorce rates.
Rising immigration, especially from eastern europe, e.g. countries like Poland.
Foreign investors buying second houses as an investment.

4. People are willing to pay higher prices and borrow more.

New types of mortgages have enabled people to borrow higher income multiples

5. The price of renting has been increasing faster than inflation. Therefore, people might as well try to buy.

• House Price Crash in London?
• London Housing Market
• London Housing Market report by GLC - PDF format
  

What May Bring an End to the Housing Boom in the UK.

What May Cause House Prices to Fall in the UK?

1. An increase in interest rate. Interest rates have risen 4 times since last summer. Future interest rate increases are predicted. Quite often, it can take several months for interest rate rises to have an impact on consumer spending. Therefore, increasingly these interest rate rises will start to impact upon consumer spending.

Rising interest rates will have a very significant impact in the UK because:

• High levels of personal consumer debt.
• Mortgage Payments account for an increasingly high % of people's personal disposable income. This is in response to rising house prices and a wider range of more generous loans.
• Most UK homeowners have variable mortgages, rather than fixed rate mortgages.

2. Fall in confidence.

If people no longer expect house prices to rise, and start to fear they may fall then demand will fall. This is particularly important for buy to let investors and other speculative buyers.

3. Increase in numbers of First Time Buyers who cannot afford a mortgage.

Despite more flexible lending by mortgage lenders, many first time buyers find they are unable to get a sufficiently high mortgage to get on the property ladder.

4. Renting is becoming more attractive


5. Lower Economic Growth. Low wage growth will reduce affordability and confidence.


6. Slowdown in immigration and growth in number of households.

See also:

• Why UK Housing Market is subject to Boom and Bust
• House Price Collapse - Is it Likely?
• Will House Prices Ever Fall?