UK House Price Trends
It is difficult to predict with 100% accuracy what the future trend of house prices will be in the UK, but there are several factors that can give a good indication of what pricing will be in later months or years. Watching these indicators along with the actual trends will allow you to make a well-educated guess as to what to expect.
A time of increasing salaries usually leads to higher house prices in the UK. In stable economic times with low unemployment rates, you can expect to pay more for a house. Consumers are more likely to make large investments and take on extra or larger payments when the financial outlook is optimistic. When the general public attitude is one of confidence in the economy, more houses are sold, decreasing the supply and increasing the selling prices. The general rule of thumb during past years was that a mortgage would roughly equal three times the household salary. This ratio has increased in recent years, indicating that salaries have risen and that house prices have followed.
When unemployment rates are up and the overall financial picture is somewhat bleak, the demand for houses usually falls. The decreased demand for houses during this time leads to declining house prices. Rising interest rates are another indication that house prices may be declining soon. When interest rates increase, buyers become wary of the higher monthly mortgage payments that result from higher interest rates and are more cautious about taking on a huge financial obligation such as a house.
One of the reasons house prices in the UK have risen during recent years is that more and more people are involved in speculation. Speculators buy available homes but do not use these homes for their own personal residences. Instead, homes are being bought for the purpose of earning additional income by selling them in later years. Besides the fact that the speculator will more than likely make a handsome profit by selling the house after housing prices rise steadily over the course of a few years, the house can also be rented while the speculator waits for a good time to sell. More people are buying homes with the intention of using them as rental properties. With the housing market in the UK growing tighter each year, it is not difficult to find someone to rent these houses.
Today’s young adults are buying houses at a faster rate than in previous generations. In past decades, few young adults could afford a home without first saving for years. One possibility for this shift is that these young consumers are able to earn higher salaries, compared to the overall work force, than their parents and grandparents were capable of earning. There is also a trend nowadays for parents to either give or lend money to their young adult children to buy a house. There is no need for these first-time home buyers to wait until they actually have the money for the deposit and numerous fees to obtain a mortgage since their parents are willing to supply them with the necessary cash. A larger percentage of young adults entering the house buying market has contributed to the overall tighter housing situation in the UK, and has helped to cause house prices to escalate.
The rising divorce rate has contributed to the increased demand for housing in the UK. Divorce rates are growing and are a factor in the tighter housing market situation as well as the increase in house prices. There is no indication that the divorce trend will reverse, so it is likely that the need for housing due to couples separating will continue to have an effect on house prices in the UK.
Another influence on the growing demand and price of houses is the continually rising lifespan expectancy. The UK population is, in general, living longer and is also in better health in later years. Older home owners are able to keep and maintain their homes for more years than past generations. Elderly citizens are not selling their homes as readily as they have in previous decades, and this has a direct bearing on the number of homes available for sale, the tighter housing market, and increasing house prices.
Grown children are leaving their parents’ homes at an earlier age than in earlier generations. More young adults have the opportunity for a higher education today, and well-paying jobs are within their reach. Many can afford to move out on their own, and sometimes parents supplement their grown children’s bank account. This, coupled with the fact that more young adults are choosing the single lifestyle, puts more of a strain on the already tight housing market. More young adults are venturing out on their own rather than combining households with a spouse.
From the 1950’s until the 1970’s, it was fairly difficult to be approved for a mortgage. Many potential home buyers were kept from reaching the point of securing a loan because of the strict restrictions that were in place. After this time period, however, banking was deregulated, leading to strong competition between financial institutions. Restrictions were relaxed, and the dream of buying a home became more realistic for many consumers. Mortgages were easier to obtain, and this resulted in a higher demand for houses. A higher demand for houses led to increased house prices.
The UK is presently experience a housing shortage after years of an increasingly slim housing market. House prices have continued to rise due to the high demand for available homes. There is a good possibility that prices will progress to even higher levels, but this will not necessarily be the case. Given the current economic picture, consumers’ confidence in the national economy could begin to wane, resulting in less general interest in buying a home. With fewer buyers vying for the houses on the market, home prices could begin to fall. If interest rates begin creeping upward, this could also lead to more potential home buyers deciding to wait before investing in a home.