Entries Tagged 'house prices' ↓

House prices in the UK now average at over £200,000. Yet, 15 years ago, they averaged less than £70,000. Some of the reasons for the large increase in house prices include:

Increase in Population. Boosted by immigration, the UK population now exceeds 60 million.

Increase in Households. There are more single people living alone now. This is due to social factors like higher divorce rates and more old people living alone.

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There is uncertainty about the future direction of house prices in the UK. Forecasts range from a collapse of 20%, to moderate increases of 2-3%. The mean prediction is probably for house prices to stagnate. However, within this house prices are likely to vary within geographical regions. For example, Scottish house prices have continued to outperform the rest of the UK.

Are House Prices Falling Now?

Amidst all the gloom and dire predictions it is worth bearing in mind, House Prices in the UK are still rising. After falling in the months of October and November, house prices in December rose leaving an annual house price inflation of 5.6%.

It is also worth remembering that the UK Housing Market has a recent history of outperforming expectations and predictions. This is because many people forget the shortage of supply compared to demand. Interestingly long term predictions of house prices suggest a 30-50% rise within the next 10 years.

However despite these underlying strengths, arguably there are a few factors which are different in 2008 Continue reading →

House prices in the UK have increased by 179% in the past decade.

This is far higher than the consumer price index. The CPI has averaged 2.0%, compared to an annual house price inflation of 17.9%

Areas which have seen the fastest increases in prices include:

• London,
• South East
• Midlands

However, the outlook for 2008, appears quite different. Most commentators predict that national house prices will fall. Although, as I argue in this post – Housing Market crash?, I feel a crash is unlikely. Continue reading →

“In 2000 the average price was 108,891 pounds; it is now more than twice that at £230,504 pounds.

Therefore, when we concentrate on decelerating house prices it is important to remember how much they have risen.

In the past 10 years, the average house price in the UK has been driven higher by various factors:

• Limited Supply.
• The Supply of new houses is at a very low level, with less than 150,000 houses being built last year. This is less than demand for houses.
• Increasing demand from:
• Lower long term interest rates
• Rising population (especially from immigration; e.g. Polish immigrants)
• Increase in number of single person households – result of increased divorce rates e.t.c
• Low Unemployment and strong growth
• Strong Buy to Let sector – including foreign investors looking to take advantage of strong rental incomes and capital gains.

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Some factors that can cause House prices to Fall

Rising Interest Rates

Increased interest rates increase the cost of mortgage interest payments making it less attractive to buy. Some homeowners may not be able to afford rising mortgage payments so they have to sell.

Sometimes there is a time delay between increasing interest rates and affecting house prices.

For example, in the UK, interest rates rose 5 times since August 2007. However it is only now in 2008 that people are having to remortgage fixed rate deals. Therefore, people on a fixed rate mortgage deal are seeing the cost of mortgages increase significantly.

Even a small change in UK interest rates can have a big effect on prices. This is because mortgage payments are a high % of people’s income
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Since 1997, UK house prices have risen by 213%. The current annual rate of house price inflation is 6.3% (although this hides recent monthly falls. How do UK House prices compare to the rest of the world.

These are some selected statistics for House prices in the rest of the world since 1997

• South African House prices  – 393% (current 13)
• Ireland House prices – 240% (current -2.8%)
• Spain House prices – 190% (current – 5.3%)
• Australian house prices – 159% (current – 10.6%)
• Singapore house prices (current – 27.6%)
• New Zealand house prices 123% (current 12.7%)
• Switzerland house prices 149% (current 11.6%)
• France house prices 144% (current 6.8%)
• United States House prices 116% (current -4.5%)
• United States (City house price index) 165% (-5.6%)

Generally, the problems in the US housing market are starting to spread. It is unclear whether this is due to the global credit crunch or local factors. However, one interesting thing is that when we talk of a US boom in the housing market, several other countries are more significantly affected.

After an unprecedented decade of rising house prices, it looks like the long boom in housing prices is coming to an end.

According to the Royal Institution of Chartered Surveyors, house prices in some regions have fallen for the first time since 2005. Whilst these price falls may be temporary and a result of volatile factors, there are many factors that explain why property prices may be set for a fall.

• 5 Interest rate rises are increasingly starting to have an impact on disposable income. The delayed effect is partly because many on fixed rate mortgages are now starting to have to get a new fixed deal at a significantly higher rate.
• Difficulty of first time buyers getting on the property ladder.
• Slow down in growth of households, especially in the north east.

London was one of the few areas to maintain rising house prices. The strength of the London housing market is partly due to the record levels of city bonuses. It is estimated city bonuses have reached £14 billion this year. However, with the turmoil in the stock market, it is likely this source of extra demand may start to slow next year. Nevertheless, combined with the factor of immigration pushing up demand in the South Easty, this year there has been an increase in the north south divide in house prices.

Will House Prices fall? 

Boom turning to gloom at Guardian 

The divide between house prices in north and south has increased in the past 12 months, reversing the previous trends of a narrowing of the gap.

According to a survey by the Nationwide, house prices in areas like Manchester and Liverpool have started to stagnate. House prices in London and the South East have continue to rise.

House prices in London are now nearly 120% the average in the north. Average house prices in London are now over £300,000. In Yorkshire House prices are only £155,000. However, even within these regions house prices can fluctuate between different areas.

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The recent floods in England have been the worst in living memory. Last month, the worst effected areas have been in South Yorkshire and Hull. More recently the floods have hit the south West. Towns near the River Severn, such as Gloucester, Tewkesbury and Cheltenham have also seen devastating floods. Rising river levels along the Thames have also caused flood waters in towns such as Oxford, Abingdon and Reading.
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With average UK house prices approaching £200,000 many first time buyers despair of every getting on the property ladder. Also, there seems little scope for making future capital gains. However, if we look around we become aware that house prices can fluctuate significantly for the sake of only a few miles. The Independent recently identified some towns which offer excellent value for money. If you are determined to buy your first house, look into whether you can move to these towns. There is likely to be real scope for property growth as well.

Cheap House Prices 

• Aylesbury: A starter flat can be bought for £137,000. Aylesbury is close to both Oxford, Birmingham and London.  Both London and Birmingham are about a 1 hour train journey. Population 70,000.
• Basingstoke: flats from £142,000 close to M3. Only 45 mins from London. population 85,000
• Glocester: Terraced houses from £140,000. Boosts low unemployment, 2 Harry Potter films. close to Cotswolds and is one of the most attractive towns in central England.
• Bridlington: Larger Family houses from £128,000. This combines an attractive seaside location with great affordability. Busy in summer, but, without the crowds of Blackpool. Great potential for house price growth.

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Thanks to Sagar for featuring UK House prices in his home onwers blog carnival

References for article: low down on UK’s cheapest house price locations at Independent