UK house prices continue to fall. In the month of August house values fell by nearly £5,000 to £164,654.
The decline in house prices is linked to the shortage of credit in the mortgage markets, but, also reflects a fundamental long term misalignment of house value. House prices have risen faster than earnings as people have struggled to get on the property market.
House values depend upon.
Location. regional variations in house prices are significant even in a city
Supply compared to number of households. This is a problem for the UK, demographics have been increasing the number of households faster than the supply.
Economy. In a recession, demand for buying a house drops off as people look to rent. Unemployment also increases the number of repossessions leading to lower prices
Affordability. In long term, house values need to be affordable. A traditional lending requirement was 3 times income. though this has often been stretched.
Mortgage availability. The lack of mortgages in 2008 caused prices to fall.
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