House Prices rising everywhere?
According to the Office for National Statistics (ONS) property values have increased by 8% in the UK in 2014.
However they have also suggested the same view as many commentators that there are 2 bands to the housing market, the London market (rising at 17% annually year on year according to Land Registry statistics) and the market everywhere else. An example of the difference is the market in the north – west where house prices are only increasing by 3.1%
Affordability is the first criteria for most mortgage applicants. In some areas such as Wigan obtaining a mortgage can work out cheaper than renting for many people. This is encouraging buyers to take the step from renting to purchasing with a Mortgage.
Average house prices
Nation/region Average house prices Annual % increase
- UK £252,000 8.0%
- England £263,000 8.5%
- Wales £164,000 4.9%
- Scotland £181,000 0.8%
- Northern Ireland £132,000 0.3%
- North East England £148,000 4.1%
- North West England £165,000 3.1%
- Yorkshire and the Humber £169,000 5.3%
- East Midlands £177,000 5.0%
- West Midlands £188,000 4.4%
- East of England £265,000 6.6%
- London £459,000 17.0%
- South East of England £309,000 6.1%
- South West of England £237,000 5.8%
The help to buy scheme has meant that some first-time buyers with little in the way of savings can obtain a mortgage and is encouraging people to change from renting to purchasing. The Help to Buy Scheme has proved successful in making mortgages more accessible
However, in London, house prices are increasing faster than average incomes. Academics have warned that this could lead to negative social and economic implications. Bill Davis, research fellow at centre-left think tank IPPR North, states. “It is a huge headache for key workers. Allowances will have to take this into account if the government does not act on supply.”
He goes on to question the ability of the housing market in London to correct itself if properties are seen as an investment, rather than a residence. Homes could be left empty of only used for part of the year putting a further squeeze on supply and house prices increasing.
Kath Scanlon, research fellow at the London School of Economics, confirms that too much economic activity is centralised in London. This is a particular problem in the UK compared to other countries.
Both Parliament and the UK’s financial district are located in the capital, whereas in the US, the federal government is based in Washington while New York is the centre of commerce and technology is centred in San Francisco
Housing in London is also aimed towards new build apartments attracting overseas investors rather than families
This results in young first-time buyers are being priced out of the market and parents are also less likely to sell the family home, in case their 20-something children might need to move back home to enable them to save for their first property.
All of these factors will restrict supply. It is this lack of supply that most commentators and economists say is the main reason for rising house prices.
Post courtesy of BBC.