House prices increase for many reasons, but a big factor is market demand. The availability of land, low government investment, and regulations preventing people from building, all contribute to changes in consumer demand for property.
But what exactly does cause the demand for houses to rise? Discover more from our property experts in today’s blog.
The long-run increase in house prices is caused by demand for housing outstripping supply. It has been estimated that 175,000 more houses must be built to meet the future demand for housing.
UK house price grows to the weakest level since May 2013
The annual rate of UK house growth in October 2020 slowed to its lowest rate since 2013, this highlights the slowdown in Britain’s property market sparked by economic uncertainty and tighter consumer budgets.
The housing market is closely linked to consumer spending
Most people looking for a property purchase it based on savings; they take out a mortgage, or loan to pay back over a long period of time. In other words, they’re buying their home in debt. This means that demand for housing is limited only by a bank’s decision of how much money they are willing to lend.
Where banks keep lending, demand keeps rising and in return, so do house prices. This is what is called the financialisation of the housing market.
House prices have been rising since the very beginning of the stamp duty holiday. The tax break has been extended with claims that thousands of sales could fall through due to delays in the moving process. Since the stamp duty holiday has been in place, more homeowners are looking to buy, particularly with lockdown coming to an end.
House prices are soaring - for now
Over the last year, house prices have jumped by 6.5%, meaning the average UK home is now worth £249,309. While you might have expected prices to tumble given the pandemic and general economic uncertainty, analysts believe that the increase in prices is down to a couple of factors.
First, as mentioned the Government’s decision to put a stamp duty holiday in place, fast-tracking many homeowners to change their priorities.
Secondly, with many people expecting to work from home in the long term, they’re now reevaluating where they want to live and what type of home they want to better meet their needs.
Thinking about putting your property on the market? Get in touch with Oakheart Property in Colchester to discuss how we can help.