Why is the UK Housing Market so High?

Housing in the UK has continued to rise throughout history and that persisted even through the pandemic. Property prices are 10.2% higher than last year and these increases don’t look as though they are going to change going into 2022.  

With all of this in mind, there must be a reason why the UK housing market is so high and we’re going to take you through the main factors to this high market.  

Low-interest rates  

These relatively low-interest rates are far more attractive than renting. This is because lower interest rates give more people access to the housing market so instead of paying rent to a landlord, they can invest in their own property. This increase in demand therefore increases the housing prices.  

Lower interest rates also offer buyers a better ROI than other forms of investment e.g. shares. This is because their property will either be worth more in the future should they sell or they may decide to become a landlord and rent out their property. This will give the homeowner an extra revenue stream which can then be invested into other properties.  

Constraints on house building 

Under the current demand for housing, the UK government have estimated that 250,000 new houses must be built each year to keep up with demand. This however, is currently unachievable with the current rate that the UK is building houses at being at its lowest level since the second world war. 

Demand is growing  

The UK’s population grew by over 300,000 people in 2021 compared to the previous year. This means that the demand for housing will continue to grow and with current estimates, the population of the UK is only going up every year.  

This increase in population means there are more people to house and if supply cannot keep up with demand then the current homes in England will become more desirable and therefore increase in price.  

Other factors can contribute to this housing crisis such as the increasing number of divorces which leads to more people living alone.  

Desire for homeownership  

As a nation, the UK has a strong cultural and economic desire to own property and whilst entry into the market has somewhat slumped in recent years with the barriers to entry being higher, very often UK families will support these first-time buyers.  

This can be done by either having parents loan their children the deposit or placing the property in their name to help them to get a mortgage. This has increased the possibility and demand of buying property.  

The UK’s housing market is most likely going to continue to rise until they provide the supply to keep up with the demand which is good for people who are wanting to sell their property, but not so good for first-time buyers.  

Pin it!