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The UK Housing Market

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The UK Housing Market The UK housing market has always been a good investment. Over much of the last forty years investing in housing usually using a mortgage have given better returns, sometimes much better than leaving your money in a bank account gathering interest. The market does seem to be a bit more volatile than leaving your money in a bank account though. During the last Boom and bust that the housing market experienced, over half a million homes were repossessed, thousands of jobs were lost and a few million home owners were left with a mortgage worth more than the value of their property. The was during the 1980's and early 1990's when the previous house price boom came to an abrupt end. The performance of the UK housing market since the awful terrorist attacks on 11th September has been remarkable. Despite many predictions of a slowdown at that time, the low interest rate policy of the Bank of England, led by Sir Edward George, has kept housing demand buoyant. As stated by the Bank of England and many others, the current rate of growth of house prices is definitely unsustainable. However, with weak economic activity and financial markets, it is unlikely that interest rates will move significantly upwards from their twenty-five year lows in the near future. ...read more.


Therefore they should be able to negotiate a price that is lower than the seller's minimum price. When demand for housing in a particular area increases, perhaps because of an increase in the local population, or a rise in incomes from lower unemployment, then there is a upwards pressure on the housing market prices. Often supply of housing is relatively inelastic. This is because of there is time between a change in price and an increase of supply of new property becoming available or prospective sellers finally deciding to put their house up for sale. When demand moves outwards and the supply is inelastic, what we get is a large rise in the market price over a small expansion in house numbers. As it becomes more elastic over time, hopefully the conditions will be the same. We would expect to see a downward pressure on prices and an increase on the equilibrium quantity of housing being sold. Below are listed some of the most important conditions that leads people to buy or sell their property. These are the conditions of demand. Growth of real incomes - privately owned housing is a normal good for most people. As living standards rise, the total demand for housing expands, as does the demand for more expensive properties as people look to move "up market". ...read more.


These are the conditions of supply. A shortage of good quality housing in the housing market would in many areas force up the value of properties. Restrictions on the supply of building land, namely in the southeast where demand for housing is usually strongest. Now that we know why prices might change and for what reason we can look at prices for individual areas. Loughton in Essex is the UK number one property hot spot, according to a survey by the Halifax. Prices in the area have risen by 75% over the last twelve months and the property now costs �298,413 on average. The traditional home of property hot spots, London, does not feature in the top ten of fastest rising areas over the last year, even though the average price of a house there has now jumped above �200,000. The Halifax found that house prices are now sprinting ahead outside London. In Smethwick in the West Midlands house prices leapt by 68% over the past year, with the average home now costing �94,264. The fact that half of the towns appearing in the top 10 are in the North shows us the greater capacity for house price growth in these towns and the rapid redevelopment of cities such as Newcastle, Leeds and Manchester. This is why if I had to buy a property anywhere in the country I would probably buy my house in northern England. ...read more.

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