Rising house prices in the UK are a result of the housing shortage and increased demand. This rise has defied traditional price growth patterns. Statistics from the ONS and Land Registry of December 2016 show a continued increase in house prices despite the market upheavals during the year. The end of the year has previously been marked as a season when the home prices slow down. However, the prices have risen by as high as 7.2% in some areas. According to the Housing index by of the December 2016 prices had increased by 1.4% or £ 3,000.
London the Most Affected
In London, average house prices are as high £483,000 in spite of the lagging growth of the capital in comparison to other cities in the UK. According to Rob Weaver, although the capital posted a high of 1.8% in December; this rate of property price growth is the lowest since the 2008 global financial meltdown. The centre of the capital is struggling even as the outskirts of the city continue to register double-digit growth. Although the demand for housing is high, there are few houses being constructed to meet this demand.
The Best Performing Part of England
The top performing region in the UK was South-East England. The region has been recording double-digit growth for the past year, side-lining a large city such as London by 4%. Luton, Chelmsford, Bedford and Cambridge, the main constituents of the region, have had average prices rising by 11.3% over the year to £280,000. This continued plummeting of house prices is the main reason for the current crisis in the housing industry according to Jeremy Duncombe. December is traditionally seen as a month when most people shift their focus to their families and festivities. However, statistics point to the contrary.
Lenders still continue to keep the rates low, and it is likely that they will continue to do so in 2017. These rates will also be affected by the government measures. The low borrowing rates, as the new rates have been introduced, has increased the demand for houses, especially for the first time buyers. The average cost of acquiring a home in the UK is approximately £220,000 based on the ONS and Land Registry house price and cost index. According to the House Price Index report, 7.4% of funding was sourced from mortgages.
Brexit and House Prices
The ONS and Land Registry Report showed that the rate of house price growth was weak in the second half of the year following the change of stamp duty in April and the June’s Brexit referendum. However, this did not have a lasting effect on price growth as it rose to 7.2 % by the end of 2016. This was an increase from the November 2016. Following Brexit, the property market has slowed down, and the small number of homes in the market.
The continued rise of house price at the backdrop of the housing shortage is a crisis that needs practical solutions. The unexpected property price growth pattern at the end of the year is a pointer that traditional assumptions are no longer valid. Government intervention may take some time to affect the market forces even as many lenders keep their interest rates constant.
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