What have been the reasons for the successive rise in housing prices in the UK over the past two years?
What do the housing price forecasts mean by the end of 2022?
What is the reason for the increase in demand in the British housing market?
According to Halifax, average housing prices in the UK rose more than £3,000 in April, the most significant monthly jump since 2016.
Consecutive increase in housing prices
The real estate consulting firm said that the average property value had risen 1.1 percent, or £3,078, over the past month. Managing director of Halifax, Russell Galley, stressed that this is the tenth consecutive month that property values have risen and is “the longest run of continuous gains since the end of 2016.” According to the report, the price of a typical home rose 10.8 percent year on year to £286,079 ($ 350,000).
The possibility of increasing housing prices in the UK by the end of 2022
At current growth rates, the price of a typical home could reach £300,000 ($370,000) by the end of the year. However, Halifax said this was unlikely given the forecast economic conditions. The report noted that prices have risen by 5 £47,568 ($58,000) over the past two years. It took five and a half years between October 2014 and April 2020 for the UK’s housing value to rise by an average of £47,689. “The imbalance between supply and demand persists, with an insufficient number of new properties coming on to the market to meet the needs of prospective buyers and strong competition to secure properties driving up prices,” Galley said. According to the report, there is evidence that demand for larger villas has been higher than for smaller properties such as apartments.
The highest monthly growth of housing prices in the last six years
In April, housing prices in the UK experienced the highest monthly growth in six years. Of course, Halifax has announced that raising interest rates on the one hand and the inability of people to buy on the other will cause prices to adjust over the next year. Housing prices rose in the UK for the tenth consecutive month in April, and now the average price per unit is £286,079. Housing prices in the country have increased by about 11 per cent since April last year, and the average cost per unit of housing in the UK has risen by £50,000 over the past two years.
The reason for the increase in demand in the British housing market
Halifax stressed that the outbreak of the Covid-19 in the UK housing market was heating up, and Russell Galley, managing director of Halifax, said: “For now, at least, despite the current economic uncertainty, the strong increases we’ve seen in house prices show little sign of abating.” Housing transactions and the number of loans repaid in the UK show that sales will continue to be high in the short term.
Recorded the most significant increase in British housing prices in the last 14 years
Contrary to previous expectations, housing prices in Europe’s second-largest economy were on an upward trend until somewhere in August 2021, the average housing price in this country increased by 1.7 percent compared to the previous month to £4,425, which is the highest growth recorded in the last 14 years. In addition to housing, prices in other sectors have risen to the point where the country’s annual inflation rate rose to 0.2 percent by August last year, up 0.7 percent from the same period the previous month. It has been the highest inflation rate in the UK for the last nine years.
The lack of housing supply is driving up prices
Russell Galley said: “The house price to income ratio is already at its highest-ever level. With interest rates on the rise and inflation further squeezing household budgets, it remains likely that house price growth will slow by the end of this year.” As a result of the Covid-19 outbreak and severe disruption to trade, some British investors have opted to move their assets to safer destinations such as gold and housing. London is still the most expensive area in the UK regarding house prices, while the north is relatively cheaper.
They are constantly raising the cost of living
The British finance minister warned of worsening economic conditions and pressure on people in the coming months, citing unprecedented inflation and rising living costs. “One of the biggest debates in economics right now is whether the world is facing a great slowing down,” Rishi Sunak told the House of Commons. “A perfect storm of global supply shocks is rolling through our economy simultaneously. Global demand – shifting last year from services to goods and exacerbating supply chain bottlenecks,” he said.
The worsening economic situation in the coming months
Sunak clarified that the economic problems are not simple, and the situation will become problematic in a few months. He added: “There is no measure that any government could take, no law we could pass, that can make these global forces disappear overnight.” The governor of the Bank of England, in a similar statement, admitted that the bank has been unable to curb unprecedented inflation in the country. “To forecast 10 per cent inflation and say there isn’t a lot we can do about it is a tough place to be… This is a bad situation to be in,” Andrew Bailey said.
Risk of recession in the UK
The Bank of England issued a statement two weeks ago, raising interbank interest rates to a 13-year high, predicting the risk of recession, while inflation has hit a 40-year high. Economic forecasts suggest that due to another jump in energy prices, inflation will reach above 10% by the end of this year. In recent months, food prices in the UK have risen by up to 60%. Studies show that one in 20 British citizens will not be able to buy food and pay energy bills over the next year.
Demand has increased for all homes, but new homes have become more popular with buyers than any other home. Despite this strong demand, we have seen that supply has decreased compared to previous months. The housing market’s future will largely depend on how long the effects of the Covid-19 on various sectors last, so current evidence does not provide an accurate estimate of the coming months.
