What are the reasons for rising house prices in the UK?

Image

A hundred years ago, it would have cost less than £1000 to build a house in the UK from nothing to completion with a little fire crackling in the corner. Today, that price tag has exploded. Currently in the UK, it costs £200,000 on average for a basic home, and for this price you will not get a fire, at least not one that’s crackling.

The basic cause of this continuous rise in price of property in the UK is a simple lack of adequate affordable housing. Supply and demand has got to a level in the UK housing market where there are simply not enough homes to for everyone to live. This has driven millions of households into poverty-stricken living conditions.

The second major reason for the cost of rising property is the restrictions placed on the building of new homes by communities and government. Despite the huge lack in housing there is not enough space to build new homes in the larger urban areas. The only way to do so is by encroaching on green belt lands. This sparks unhappiness and resentment within local communities and a rejection of proposed housing projects. Many people are for the development of more housing, yet they do not want it in their back yards.

The Conservatives have a plan to allow local communities to purchase property in order to protect green belt land and gain the right to choose what buildings are placed in the area. This means the community will gain responsibility for their own housing shortage and problems associated with it. Proposed taxpayer-funded housing initiatives would make resources available to encourage communities to work with industry to build homes everyone wants to live in.

The rising population is due in part to immigration and is, in turn, part of the cause of the rising demand for housing. Other social factors such as more single people who get married later, more elderly people who live longer and divorcees. All of this has meant more people require housing that is simply not being built. As these people often find it impossible to buy a home on their own, they struggle drastically often ending up in Social housing. The Conservatives want to use social housing as a stepping-stone to improving the lives of people in a lower income bracket. This will allow them the freedom to do more with their lives while achieving personal success, which could then see them one day owning their own home, devoid of the burden of rental eating away at a minimal income.

View answers to similar questions

This content is aggregated from other web sites. Please see our terms of use.

  • UK Mortgage: SVR or Fix ?

    Hi People

    I know what I'm asking is one of the most gambled financial questions many of us have to make a decision upon and ultimately only I can make the decision as there is no real fast or easy answer, but I am interested in your view and reason behind it. So if you have the time to give me your view it would be greatly received.

    I have held a mortgage with the halifax since 2002 and just finished my third mortgage product with them, a fantastic tracker at 0.69% above B.O.E base rate. I have reverted to the Halifax SVR of 3.5%.

    My payments have more than doubled, yet are still lower than they were 3 years ago when I was on a fixed product of 4.89%. I just don't know which way to go now, my choices are-

    1) 2 Year Tracker +2.69% (so 3.19% at current rate)
    2) 2 Year Fixed at 3.89% £999 start up fee
    3) 3 Year Fixed at 4.79 no fee
    4) 5 Year fixed at 5.89% no fee

    or-

    5) Stay on the SVR 3.49%

    As much as the SVR seems appealing now, is that a short term gain given the economic climate? There seems to be much speculation as to what will happen with the Bank of England base rate. I am no economist but the way I see it is, yes they may have to rise the base rate 1/2 a point, then perhaps two more half points to end up at 2% in the next two years. But they must do so with caution as no one seems to be buying much at present and if they increase too much then we'll have a static housing market.
    This is an educated presumption as I am currently trying to sell another property in Nottingham for 90k, with not as much as a sniff of interest. The 4 bedroom, Victorian house is very pleasant and priced fairly, the problem is no first time buyers seem to be able to afford the deposit and no investors want it either. Would interest rates rise firther stagnate the market?

    Having done some calculations, the tracker offered for 2 years would allow the rates to jump up by a point and remain cheaper, but if they move up further then the 3 year fixed appears the best option.

    I have not thought or looked at predicting the economy in 3 years time, this is beyond my knowledge or ability to site trends. so I hand the question over to you............
    You have mentioned the mortgage fee in your list, but are you taking other fees into account. You will probably have to pay legal fees and a valuation fee, which may come to £500 or more. So you have to take this into account when considering the "savings".

    Mortgage rates are based on the rates banks can get when borrowing from each other. These are based on the Bank of England (BOE) rate, but will vary depending on the length of time you are borrowing for. This is because the rate reflects what the lender thinks BOE rates will do over that time period. So the mortgage rate you are offered is basically the inter-bank rate for that period, plus a profit margin. This margin depends mainly on how risky you are - the higher the risk the higher the margin. Your tracker rate gives a guide as the the kind of margin you are being offered - eg 2.69% above the baseline. I think this is about as low as it gets at the moment.

    My understanding (from news reports etc) is that banks have set their 3 and 5 year inter- rates based on an assumption that BOE rates are going to rise by 2 or 3% in the next couple of years. If this understanding is correct then fixed mortgage rates should not go up (straight away) if BOE rates start to rise, because they have already factored this in. But if it turns out BOE rates stay lower for longer the banks might actually drop their fixed rates in the coming months. Either way, you are better off staying on your SVR and jumping on to the fixed rate only when BOE rates start to rise, or when fixed rates drop a bit.

    Historically a banks SVR was their worst rate. But they got so much bad publicity a few years ago, that the SVR is currently not that bad compared to their other rates. I suspect that as the economy recovers the SVR will start to look bad as offers and competition comes back into the market. But for the time being the SVR is often just as good as the other rates you can get, and has the advantage that you don't need to remortgage and pay all the associated costs to get it.

    In general you don't necessarily save much, if anything, by jumping from one fixed rate deal to another. The banks want to make their money, so the average rate over the 25 years of your mortgage, is likely to be similar to the rate you would have got by staying on an SVR or a lifetime tracker. If you take into account the fees for continuously re-mortgaging you might end up paying more for regularly switching. The only benefit of fixed rates is that you know what you will be paying for the next 3 or 5 years, which some people prefer to the volatility of payments that could change each month.

    If you have the guts to stick it out for a bit you might find that long term trackers start to look like the best bet. I doubt you'll ever get as good a deal as you could have got before the credit crunch (I'm on a lifetime tracker 0.44% above base rate), but I'd like to think you'll get something better than 2.69% above BOE base rate.

  • Thinking of moving to Leighton Buzzard from Watford and need advice please?

    My family and I are thinking about moving to Leighton buzzard from Watford due to rising property costs and need advice from someone who lives/ or lived there on the following:

    Locations to live in
    Any parts of the town to avoid?

    Primary Schools
    Are they are good in the area? Any to avoid?

    Secondary Schools
    Again as above

    Transport
    The train service to London mainly, is the service reliable?
    Is there any parking close to the station i.e. residential that wouldn’t cost anything?

    Local live
    Restaurants, shops etc

    What is the crime rate like?
    Having lived in a few areas in the UK I no that everywhere has its problems, but an inside view would be good on crime, local kids hanging around i.e. chavs

    The area seems very reasonably priced to buy a property, is there any reasons for this? We have looked around and seems really nice

    and finally any further information you have on medical facilities, house prices, traffic etc

    Thanks in advance
    Locations to live in - Newer estates such as Sandhills and Pages Priory are favourable. Have a look on a property website for info on houses, think the new build in Pages Priory are by George Wimpy, check their website. Prestigious areas are Plantation Road, Heath Road with larger older style houses.

    Any parts of the town to avoid? - Avoid areas called Meadow Way, Broomshill Road and Churchill/Nelson Way

    Primary Schools/Secondary Schools - We have 3 tier school system here, lower school - ages 4 - 9 (i think!) the lower schools are all fairly similar and a good selection of them, middle school - ages 9-13 for a better school Linslade Middle, however there are 4 decent enough schools to chose from. And finally two upper school Vandyke Upper and Cedars Upper, both have sixth forms, have a look on thier websites for up to date exam results. However Cedars is the preferred school.

    Transport - Train service is like anywhere else in the country, not too reliable, seating is the main problem, but a coach company called Marshalls do a direct service from Leighton Buzzard to London which is cheaper and more comfortable than the train. Parking wise, there is on car park at the train station but I think this is £5 per day, and there isn’t really any other parking nearby.

    Local live - Shops aren’t brilliant but have a market on Tuesdays and Saturdays, good selection of supermarkets, charity shops, café’s and pubs in the high street, however a short 15 minute drive will take you to Milton Keynes, which is worth a short run in the car as they have plenty of shops.

    What is the crime rate like? – the only major problem with crime is like anywhere, kids hanging about, however have a look on Bedfordshire police website and that should give you crime figures. In 20 years of living in Leighton Buzzard, I personally have never had any crime committed against myself.

    I will say finally that the best thing you could do is to have a drive up here and have a look yourselves round the local area, maybe take a trip round the local villages and to Milton Keynes to get a feel for the area. Come down on the 4th May and there is a MayDay fair which happens every bank holiday every year, which always proves to be popular with everyone as there is a funfair/stalls etc. Also have a look on www.leightonbuzzardonline.com for our local news.

    Let me know if there is anything else you would like to know.

    Good Luck.

    X