Looking at the historical data for UK house prices, we can see how volatile UK house prices have been.
When forecasting house prices and the future of the housing market, there are several things to consider:
Number of new houses built
Number of houses unoccupied / unsold
Number of households. This depends on both population growth and demographic factors [...]
UK house prices have fallen significantly in the first 6 months of this year. It is the first major fall in annual house prices since the great crash of 1989 to 2004 (where prices fell 20%)
The driving force behind the falling house prices are the shortage of mortgages available, especially for first time buyers. Even [...]
The fall in house prices continues, despite the odd statistical anomaly.
Mortgage approvals have fallen to the lowest level on record. This is due to the credit crisis which has led to a drying up of mortgage funds. Many would be homeowners are simply unable to get a sufficiently large mortgage.
There are also signs of problems [...]
Amidst all the talk of falling house prices and a collapsing housing market. Rightmove reported an unexpected increase in house prices in April of 1.2%. This rise seems to defy the gloomy prediction of a house price collapse and as we have argued, house prices in the UK are not overvalued as many claim.
However, it [...]
With House prices falling, to what extent should the government intervene?
Benefits of Falling House prices
1. Increase the affordability of housing. Currently many first time buyers are unable to buy houses because house price to income ratios are very high. As house prices fall, people will be able to live cheaper; this increases living standards, especially [...]
Why The UK Housing Market Experiences Boom and Bust Economic Cycles
A boom and bust cycles refers to the rapid increase in prices, followed by a period of falling house prices. This has occured on numerous occasions in the UK housing market, most notably during and after Lawson boom of the late 80s
Reasons For Boom and [...]
If house prices fall significantly, they will not just leave homeowners with negative equity, they will also cause serious economic consequences for the wider economy.
These are some of the most important factors.
1. Negative Wealth Effect.
Homeowners will see their major asset (housing) decline in value. Some who bought recently will see negative equity (House is worth [...]
Although, UK house prices are falling, there is a concern that rented accommodation could experience a shortage.
The number of buy to let mortgages on offer has fallen significantly (40% fall), therefore, there is likely to be a fall in the number of available houses for rent.
Secondly, many first time buyers are seeking to rent rather [...]
I wrote an article here: about - who caused the housing boom and crisis.
There are many factors which led to the booming prices. In the UK, a large % of this represented the fundamental disequilibrium between supply and demand. But, it was also helped by:
Increased availability of unconventional mortgages
A strong social desire to get on [...]
Speaking in today’s Daily Telegraph, Peter King chief executive of the National Association of Estate Agents said:
“the irony is that there is no shortage of people wanting to move, but without mortgages they just can’t do it.”
The government are hoping that banks and building societies will relax their lending criteria and help to kickstart the [...]
Building societies showed the damaging effect of the tightening credit markets as the number of mortgage approvals fell dramatically. According to the Council of Mortgage lenders Building societies advanced net loans of just £580m in March, down from £1.8bn in the same month last year. The reason is the shortage of funds in the credit [...]
What do you think will happen to house prices in the UK?
How much do you think they will fall by and for how long?
Is it a good thing or bad thing if house prices fall?
What should the Government do to improve conditions in the Housing Market?
Feel free to leave a comment or ask a question [...]
Why House Prices in the UK have risen in the past 12 years.
1. Inelastic Supply. The number of new houses built in the UK, is approximately 160,000 a year. This may sound a lot but it has been much less than the demand. The % increase in the supply is much less than the % [...]
In the short term there are many factors which are dragging down house prices.
Lack of Mortgage Lending. This is probably the biggest constraint on housing prices at the moment. The freezing up of credit markets mean that banks have become reluctant to lend. They are requiring lenders to have large deposits; many homeowners with good [...]