Why are House Prices in the UK so expensive

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.

Buy To Let Investment. Housing is seen as a good investment, a good way to increase wealth. Therefore there is an element of speculation. The buy to let investment includes increased demand from foreigners.

Shortage of Supply. The number of new houses being built is very low. It is insufficient to keep up with demand. Supply is very inelastic.

Low Long term interest rates. Since 1997, UK interest rates have been relatively low meaning that it is cheaper to make mortgage payments.

High Growth. Low Unemployment and high period of growth has encouraged people to buy. Confidence in economy and housing encourages people to take out a mortgage.

High cost of renting. The only substitute to buying is renting. Renting has continued to increase above the rate of inflation.

Mortgage Lending more flexible. New mortgage products enable first time buyers to take out bigger loans. For example, self certification mortgages.