Property Prices Explained
Where are the UK property prices headed, considering the recent highs and the news surrounding the market? Trying to predict the house price direction is probably a fools game, but one can look at the fundamentals of the housing market to assess the current state of the property market.
There are a number of factors that are having an affect on the UK property market, which have been unknowns previously. These will continue to affect the market in the coming years. These include the fact that the UK being a relatively small area is running out of space as developments continue to rise. There is however limited planning permission that can be granted, and this creates a gap between the high demand of buyers and the low supply. So in essence there is a shortage of housing which is set to continue.
In addition to that we have a requirements for more houses due to a number of factors, some of which include:
An increase in the number of people living on their own as marriages and relationship breakups continue to rise
People living longer
Number of people in a particular household is generally decreasing
The rise in immigration that is bringing millions of new people to the UK, so the UK is growing in population as a country
The new entrants into the UK are younger and fertile giving rise to new children and populations
As well as the above, there is also a collapse of confidence in pension funds, giving a rise to the demand for property. The reduction of the capital gains tax has also driving people to buy houses for pension purposes when they retire. This has also helped fuel the buy to let market.
Although there may be a correction in house prices, the property fundamentals are still pointing to a rise in long term prices. Good property investment normally relies on long term gains over cycles of many years.