WHAT INFLUENCES THE UK HOUSING MARKET?

Properties

In the UK the condition of the UK housing market determines the price of the property. Here’s a rundown of what influences the UK housing market and how it can affect you as a homebuyer for what you’ll pay for a property at a given time.

 

What is the UK housing market?

 

The UK housing market is the market for buying and selling properties in the UK. It brings together different stakeholders, such as homebuyers seeking to buy a property, homeowners who are selling their properties, renters, real estate investors who buy and sell properties solely for investment purposes, vendors, and estate agents, who act as enablers in the process of buying or selling a property.

 

In the United Kingdom, 60% to 70% of households own the property they live and the remaining 40% to 30% are renters. 

 

What is the importance of the housing market for the economy?

 

The housing market and the economy have closely mirrored each other. A strong economy has a positive effect on consumer’s confidence, employment, expectations, and wealth. And all of which will have a positive effect on demand and prices in the housing market. Similarly, when house prices fall the consumer’s wealth reduces, creating a negative effect on the spending of the consumer and consumer’s confidence. Therefore, the total demand will fall and the injections into the circular flow of income between producers and consumers will reduce which will lead to lower economic growth. Unless other factors override this. And the inverse of both scenarios is also true. 

 

For instance, when house prices rise, it is usually a sign of confidence in the market. When there is high confidence, there is a greater likelihood of people spending or borrowing money. On the other hand, when the house prices decline, this affects homeowners to lose confidence as their home is now worth less than before. And if the prices decreased enough to make their house less than the remainder of the mortgage that is unpaid, then it becomes a major problem. Therefore, as a result, the homeowners will tend to spend less and will likely get a new loan. 

 

What affects the UK housing market?

 

Supply
The supply of housing is the flow of properties available at a given price at a given period. Factors such as cost of production, government policy, number of construction companies, government spending on new social housing, and innovation and technology.

 

A shortage of supply in houses or properties pushes up prices. So, if there’s a shortage of new homes being built, or there aren’t many properties for sale, there is a likelihood of higher house prices. Thus, first-time buyers may notice it’s harder to find an affordable home, and all buyers have less negotiating power.

 

 

2.     Demand

The demand for housing is the number of properties that homebuyers are willing and able to buy at a given period. Factor real incomes, cost of a mortgage, availability of credit, economic growth, population, employment or unemployment, and confidence of the buyer affects the demand for housing.

 

If the supply exceeds demand and there are more properties available in the market than the number of homebuyers, house prices go down. As a result, home sellers may need to lower the price of the properties they are selling.

 

3.     Buyers Confidence

 

The buyer's confidence has a huge impact on the housing market. If the buyer feels optimistic about the future state of the economy, they will be more likely to go ahead with purchasing a house, thereby increasing demand.

 

4.     Mortgage

 

The majority of homebuyers will take a mortgage to pay for their home. One of the largest sources of debt for households in the UK are mortgages. 

 

If more lending banks are willing to provide better interest rates, more people will borrow to spend on housing, thus, the prices of the house will be higher.

 

On the other hand, when criteria for applying for a mortgage are stricter or interest rates are less favourable, the demand for mortgages can drop, the house price will be lower.

 

In conclusion, knowing and understanding the factors that influence the housing market can enable you to make a better prediction of the housing market.  

 

Are you thinking of buying a property or selling a property? We can help you. Bluestone Properties is a letting and estate agency based in south west London. Call us on 0208 355 3405 or simply Click Here and fill up the form.

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