Prices are even cooling off in London, which has been the main engine room of house price inflation in the UK.
"Annual house price inflation in London was 17.4% in August, down from 19.1% in July," said the DCLG.
With fewer home-buyers taking out new mortgages, it seems likely that house prices will ease during the rest of the year as the number of sales declines.
Source from BBC news.
House prices across the UK tumbled last month at the fastest rate for two years, a leading industry survey shows today, while demand from first-time buyers plummeted sharply, adding to widespread evidence that the housing boom could be over.
The Royal Institution of Chartered Surveyors said house prices declined in September for the second month in a row with 14.6% more surveyors reporting a fall in prices rather than a rise. This was an increase on the 3.3% more surveyors that reported a fall over a price rise in August.
House prices fell for the first time in two years this month, sending a shudder through millions of homeowners already hit by rising mortgage repayments and more expensive borrowing. The outlook for homeowners is likely to worsen with news that the wealthy are losing confidence in bricks and mortar as an investment.
Investigation
I am going to investigate the rising costs of house prices in the UK. To do this I will use primary data by making and handing out a number of questionnaires to local estate agents so I can find out the relationship between the supply of houses and the demand for them.
I will also use secondary data by examining news reports mainly from the BBC website as there has been a lot of information about the housing market on the news. I will also research house prices in different areas to compare with each other.
Furthermore I am going to interview someone from a small estate agent who are just starting out to get inside information about the housing market.
Questionnaire
- How many properties do you have on your books?
…………………………………………………………………………………….
- How many applicants do you have?
……………………………………………………………………………………..
- Do you believe house prices will continue to rise?
Yes
No
Please explain your answer ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
- What do you believe to be the cause of rising house prices?
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
- Do you believe there will be a crash in the housing market? Please explain.
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
Analysis
I surveyed the following estate agents
- Your move
- Brar and co
- Reids Rains
- Cook and co
- Stanton croft
They answered the first and second questions as follows:
For the third question all estate agents answered yes, however when asked to explain their answer both cook and co and Stanton croft said they believed house prices would not increase too much in the next five years in the coastal areas as while there is a demand for the properties on their books there is also a good supply. It is also due to the mortgage rates going up.
However Reids Rains, Your Move and Next to Buy all claim house prices will rise for flats and family homes as there will always be demand. The results are shown in the chart below.
There was a range of answers for my forth question the results are as follows:
- Reids Rains believe the demand for houses are to blame for rise in prices as they have a lot more applicants than properties.
- Next to Buy say the demand for investment properties is pushing up the cost for first time buyers as they are competing for the same properties and first time buyers are prepared to pay as much as they can to get the house they want.
- Your Move had a similar answer to Next to Buy who say they also have a lot of investors who price first time buyers out of the market and they say once investors have developed properties they want to make as much money as possible so they put them up for sale for more than what they are worth.
- Cook and Co believe the increase was down to the boom in the housing market in around the year 2002 where people rushed to buy anything and everything and houses where selling in days.
- Stanton croft said they where unsure.
- Brar and co said it was down to estate agents overvaluing houses so they could compete with each other.
None of the estate agents thought there would be a crash in the market and they said this was down to there being a great demand for houses especially small houses and flats. Brar and Co said "The reason we don't expect to see an early-90s-style crash is because interest rates are not expected to go through the roof and the economy is holding up."
However Cook and Co said there has been a decrease in the demand for larger houses due to the mortgage rated being so high which is preventing people from being able to afford bigger houses which has lead to the fall in demand.
Evaluation
I have investigated what is going to happen to house prices and from looking on the internet and from surveying estate agents I have found:
- It is unlikely for there to be a crash in the housing market.
- House prices are likely to increase a small amount but this varies depending on the area and the size of the house. For example house prices in London will continue to rise because there will always be a great demand. Also there is more of a demand for smaller houses so their cost will go up faster than larger ones.
-
The demand for houses is greater than the supply therefore it is unlikely for prices to decrease greatly. However while demand from first-time buyers plummeted sharply, adding to widespread evidence that the housing boom could be over.
- With fewer home-buyers taking out new mortgages, it seems likely that house prices will ease during the rest of the year as the number of sales declines.
- People are struggling to afford mortgage repayments with the interest rates increasing therefore they can’t afford to buy larger houses which is leading to their value decreasing.
- It now seems clear from all available evidence that the housing market is slowing down, with prices cooling off while both house sales and new mortgage approvals are dropping.
Bibliography
I have used information from:
