This probably is the one question everybody is asking himself and the ones around him. The most common explanation is that there are too many people and not enough houses to accommodate them. This is true, but prices are have also been pushed by the billions of pounds of new money that banks in the UK made in the years before the financial crisis in 2008.
Here are three reasons that affect the constant rise in house prices on the UK market:
1. People's wages rise slower than house prices
The prices in real estate industry rise way more quickly than people's wages, which leads to houses become less affordable. If you had your house before the crisis, then you are good. But the ones who hadn't, pay more and more of their wages to pay for their sweet, sweet home. Sadly, soon this effect will be passed along rents and they will also rise.
2. Banks created crazy amount of pounds and invested it the property market
During the period from 1997 to the start of the financial crisis in 2007, house prices increased three times. It is not untrue that there were not enough houses for the population, but it is only a small fraction of the whole situation. The thing is – banks create money every time they make a loan and during that 10 years period of time, the amount of money banks have created thanks to mortgage lending has increased 4 times compared to previous period. This is strong factor that made UK's house prices rise.
Source: http://positivemoney.org
3. House price bubbles are no good for anyone
The speculative behaviour which is a main part of the house price bubbles, higher level of unemployment, lower temps of growth and all will result in increasing the government debt. The artificially-increased house prices are a way to transfer wealth from poor to the rich, from young to the old and from people who don't own their place to those that already do.
House prices, two words that people in United Kingdom will never stop using. It is not a secret that the house prices are one of the pillars of the UK's consumer economy. In 2015, house prices are rising in the UK, but surprisingly the ones in London froze a bit. It is a surprise because economists predict that London properties will become even more expensive, 30 per cent more over the next few years.
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