House Prices in the UK
House prices in the UK have fallen quite rapidly recently, for instance the Halifax reported a 2.5% monthly drop in the cost of an average home, which is just short of £5000. This is the largest monthly decrease since 1990’s specifically in 1992 when they fell 3%. However there are contradictory reports that state in the first quarter of 2008 house prices actually rose in some areas. The number of houses actually built has also increased over the last few years, but so has the cost, they have increased approximately 30% over the last 30 years, prices between 2001 – 2006 increased by 60%. Divorce Rate has also increased which is one reason for the increased number of houses built. But buy-to-let has created a situation where there is a shortage of houses to but and has increased homelessness.
There are many reasons that can cause the housing market to fail, such as the planning regulations which can reduce the supply and increase the demand and therefore the cost increases. It takes a long time to actually build a house and planning permission can take a long time, and so the supply struggles to keep up with the demand, also the large increases in demand will only lead to a small number of increases in construction. There is also a lack of skilled labor for construction expensive building materials has increased the cost of construction which has increased the cost of houses.
Low interest rates can increase the demand for housing, the economy has grown substantially over the last 10 years, people are earning more and so more people want to buy a house. There is also a belief that people can but a house rent it for a year and then sell it on making a tidy profit which further increases demand.
The government has had some ideas to quell the current housing problem; it suggests building millions of new homes to clear the back log of 2-3 million homes from 2006. this can be achieved by disbanding greenbelt designated areas, and planning departments, they are also looking to increase the number of migrant workers to quell the skilled labor shortage, but this creates a problem of its own as the migrants would need somewhere to live.
It is estimated that 2 million new homes are required to be built by the year 2012 to cover the shortfall. If the government were to reduce stamp duty then it would help reduce the overall cost of buying a house, if the government reduced the amount of red tape for builders it would allow the supply to keep up to the supply.
Mira Bar-Hillel, Property Correspondent (28.07.08) Article from thisislondon.co.uk
London house prices plunged by 2.5 per cent last month to record their biggest fall so far this year, official figures revealed today.
Statistics from the Government's Land Registry show that prices in the capital are falling faster than anywhere else in the country. The average London home sold last month cost £345,136 - nearly £10,000 less than in May. The biggest drop was 2.7 per cent in Hammersmith and Fulham while in Bromley prices were 1.6 per cent down, and Richmond, they were 1.3 per cent lower. The best performer, Kensington and Chelsea, recorded only a 1.1 per cent increase.
House prices nationally fell by one per cent last month. The figures are particularly significant because, unlike other house surveys, they are based on actual sums received by vendors. A separate report, commissioned by the National Housing Federation, today claimed prices in London would rise by 15 per cent by 2013.
Produced by Oxford Economics, it said prices would continue to fall this year and next but begin rising in 2010 as demand outstripped supply. However, experts have predicted a 20 to 25 per cent fall in London by 2010. The 2.5 per cent drop reported by the Land Registry is five times greater than the next worst monthly figure in the capital this year. Despite this, the average price is still 2.4 per cent higher than in June last year. Outside the capital, falls last month were steepest in the East at 1.9 per cent and the West Midlands and Wales at 1.7 per cent and 1.6 per cent respectively.
The West Midlands recorded a yearon-year drop of 2.3 per cent, while Wales and the South West had a 1.3 per cent fall. Apart from Kensington and Chelsea, the only other London boroughs to see prices rise last month were Havering, up 0.3 per cent increase, and Southwark and Kingston both up by 0.1 per cent. The Nationwide, which records the amount approved for lending to buyers, is expected to release figures on Wednesday recording a 7.5 per cent fall year-on year.
The latest data come as property intelligence group Hometrack said prices in England and Wales fell for the 10th month in a row, losing 1.2 per cent of their value. The average property cost £168,500, the same as in October 2006.
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