Why Have House Prices Risen In The UK So Much


by Richard Pettinger - Date: 2007-01-19 - Word Count: 402 Share This!

1. Increase in the number of households. The population of the UK has risen relatively slowly. But the number of households has increased at a much faster rate. This is because

a) Increase in life expectancy meaning there are more old people living alone.
b) Increase in divorce rates, leading to more single people
c) Change in social trends causing young people to wish to move out of home earlier.

2. Lower long-term interest rates. In the 1980s and before the UK economy was more subject to fluctuations in the economic cycle and inflation. As inflation increased to 10 or 20% interest rates would rise leading to mortgage payments becoming more expensive and discouraging people from borrowing. Interest rates are not only lower now but also more stable. This has made paying a mortgage more attractive.

3. Increase in price of renting. Although house prices have risen the cost of renting has similarly increased, making the alternative to buying a house less attractive.

4. Increased competition amongst mortgage lenders. With the financial sector deregulated in the 1980s there is much more competition, including online mortgages. This has increased the number and range of mortgages making it easier for people to get a mortgage, who otherwise could not have afforded it.

5. Parents using equity gains to help children. Many of the older generation are sitting on significant gains in the value of their house. This equity is often being used to provide a deposit for their children to get on the housing market. Therefore sustaining an increase in the ratio of house prices to earnings.

6. Long period of economic growth and low unemployment. This has also helped increase economic confidence about future economic trends, therefore this has encouraged people to take on bigger mortgages.

7. Shortage of Supply. One of the main factors in the UK housing market is the acute shortage of housing, especially in popular areas. This means that even a very small increase in demand is having a proportionally bigger increase in price.

There are several other reasons for rising house prices such as increased immigration, people buying second homes and increased demand from foreigners. However perhaps the most significant reason is the low long-term interest rates combined with the increased choice of mortgages. Therefore, combined with the UK population's strong attachment to owning a home, house prices have continued to rise well above inflation. The interesting question is for how long this remarkable growth in house prices can continue.

Article on: Will UK house Prices fall?


Related Tags: house prices, uk housing market

R.Pettinger lives in Oxford where he is a member of the Sri Chinmoy Centre. He enjoys writing biography's of inspiring people. And edits a website called Biography Online. Your Article Search Directory : Find in Articles

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