Why are uk house prices increasing?
The average cost of a UK home rose by £25,000 in the 12 months to August, official figures show, with growth across all regions. Property prices fell 0.5% in July thanks to the tapering of stamp tax relief in England and the termination of customs holidays in Wales. On a regional level, property price growth in Great Britain was highest in Wales (up 9.4%), Northern Ireland (9%) and north-west England (7.9%) last year. An investor looks at the rate of return on housing (rentable income) versus the cost of buying a house (mortgage interest).
Despite the volatility of the real estate market, residential properties have increasingly been seen as a good investment. The demand for more space, both indoors and outdoors, has continued to rise sharply, driving demand for houses and leading to stronger price growth for these properties. Despite these financial and economic upheavals, house prices in the UK have bucked the trend, avoided a major collapse, and now surpassed pre-crash levels. The Halifax index is the UK’s longest-running monthly national property price series and dates back to 1983. Regionally, the northeast recorded the strongest growth in property prices last year, at 10.8% until July.
And yet, for every 4 new people who entered the economy through population growth and immigration, 3 new houses were built. It is the fifth consecutive month that average house prices have risen, with typical values more than £20,000 higher than last year. This is because if a bank lends someone money to buy a house and doesn’t pay it back a few years later, the bank can simply take the house back. The fall in house prices in July coincided with the start of a rejuvenation of the UK government’s Stamp Duty holiday incentive.
Despite some short-term fluctuations, demand for housing has risen faster than supply. This further motivates people to move before the house they want to buy becomes more expensive. Swap rates lenders use to value their loans have risen, and home loan profit margins are already “very tight,” he said, by previous standards.