UK is one of the most appealing destinations for people to settle in. This is due to the fact that living in the UK offers several attractive features. In the UK, people of all cultures and nationalities coexist together, making it a diverse place to live. Moreover, living in the UK is almost like living in a fairy tale because of all the historic houses, churches, and even castles that are present.
Additionally, there are 24 international airports in the UK, making it straightforward to travel to and from the country and across Europe. Moreover, residents of the UK get access to the National Health Service and accessible healthcare, which is a tremendous perk that not many other countries can provide.
The desire to move to the UK, therefore, is quite understandable. However, if you’ve spoken to UK estate agents or referred to the business news, you would’ve realised that it might be a distant dream. This is because house prices have gone up to unprecedented levels in the UK.
Skyrocketing house prices in the UK
According to the most recent yearly estimates from the statistics authority, the Office for National Statistics (ONS), the average UK property price reached £283,000 in May after increasing more than the mean average pay for all workers in the UK, which is £31,447, i.e. the increase in house prices was greater than the average yearly earnings in the UK.
After the average property value grew by £2,857 in May, the average UK house price reached a new record high of £271,613 in June. In July, the average cost of a home grew by 0.4 per cent. Furthermore, the average first-time buyer’s monthly mortgage payment for someone taking out a two-year fixed rate is 20 per cent higher than at the start of the year. The rates have been so expensive that millennials choose to rent rather than buy houses.
Factors affecting House Prices
There are many other causes for such high house prices:
(i) People’s desire to relocate is rising (by 26%,
(ii) there are fewer homes for sale,
(iii) interest rates are extremely low,
(iv) there are constraints on the supply of homes,
(v) there is an increase in demand for homeownership,
(vi) there is the Covid Effect, and there is
(vii) wealth inequality.
Area-wise distribution
With prices jumping by 15.2% in May, Northern Ireland saw the highest annual house price inflation in June. At 14.5%, the southwest of England likewise had rapid annual growth. Wales saw a 13.7% yearly increase in housing costs, bringing the average home value to a record-high £216,120. Only Scotland, London, Yorkshire and the Humber experienced annual house price inflation below 10% in May. Maket research shows that Scotland’s house price increase is still “underperforming” compared to the UK average, with annual inflation at 8.3%.
Property wise distribution
People are leaving large, expensive cities in search of a better quality of life and more space in rural areas, where they can work from home. This has an effect on the prices i.e. the type of home that buyers are seeking continues to influence how much property price inflation will affect them. For example, you would need about £10,000 more to purchase a flat compared to May of last year, but an extra £50,000 to buy a detached house.
Larger family houses are in higher demand than smaller residences like apartments, and prices for detached and semi-detached properties are climbing 12 percent annually compared to 7.1 percent for apartments.
Conclusion
UK house prices are hitting records. Millennials cannot afford it and therefore resorted to renting or buying houses. Reasons for such high prices range from covid effect to wealth inequality. The difference in prices has been documented depending on the area and type of property.
Higher taxation on investment properties, as well as improving alternatives to home ownership by increasing affordable housing provision and regulating private renting, are recommended ways to keep house prices stable and help lower the house price to income ratio over time. Anyways, The market is expected to cool soon, and the prices might become affordable yet again. Meanwhile, keep an eye out for the market!