Housing Archives - expatrist.com

Let's face it - the United Kingdom is an expensive place to live. The cost of living is high, and the price of housing is no exception. In fact, according to The Guardian, the average house price in the UK has surpassed the £260,000 (about $342,000) mark for the first time. Compared to other areas in Europe, houses in the UK are expensive. First-time buyers, investors, and movers keep watching their dream of owning properties rise higher beyond their reach. The high cost has been contributed to by the low supply of housing relative to population growth, the high demand for housing from buy-to-let investors, and foreign buyers snapping up properties in prime locations. Other factors include low-interest rates and the post-pandemic factor. Since the cost of an average UK house has increased almost twice as much as the wages of an average UK worker over the past fifty years, it's clear that climbing the property ladder continues to be expensive for many citizens. In fact, London's property prices are unbearable. So, what's driving up the cost of homes in the UK? Reason Behind High Prices on Houses in the UK Buying a house is costly at the best of times, but the demand for homes in the UK, among other factors, has driven house prices all over the country to unattainable levels. However, some parts of the UK are more expensive than others. The closer you live to a major city, particularly the capital, the more the cost of housing. The reasons for the high prices are: 1. Household and population rise Cases of increase in households and overall population in the country have led to a rise in house demand. Although the UK population has risen slowly over the years, the number of households has gone up fast because of: Increased divorce rates, leading to more singles. As a result people who once lived together, are forced to live separately, meaning more demand for houses.Changing lifestyles where young people move out of homes at a younger age.Increased number of foreigners relocating to the UK for studies and investment. The UK, especially London, is more desirable to foreign investors. The increase in households and population happening in a country where the supply of houses is too limited to meet the rising demand means growth in property prices. https://expatrist.com/how-much-does-a-house-cost-in-london/ 2. Post-pandemic recovery For about two years now, the property market in the UK has been analyzed through the lenses of the pandemic. As the coronavirus intensified, people lost confidence in investing in the property market. Right now, things have normalized, and everyone wants to buy a house for either personal or commercial use. This, combined with pandemic time potential investors flocking the country from other countries, causes house prices to rise. 3. Interest rate levels Most people buy houses based on savings. Through savings, they can get mortgages or loans to purchase a property. This has been made possible by the low-interest rates in the UK, which have been at rock bottom for about a decade. Low-interest rates mean more people can afford to buy property, hence a rise in the demand for houses. This translates to high house costs. Average House Price in the UK in 2022 The property market started in 2022 on a very high note, having recorded the highest average house price growth in nearly 15 years. Despite the current inflation, house prices have defied expectations as they continue to rise. The average house price varies with regions, with the urban areas recording a higher cost than the rural ones. The average house price in the UK is £278,123, which is a 10.8% increase from 2021. North West has an average house price of £213,200 after recording a 12% increase, the highest in the country. London comes in last with a 4.5% increase, making its average annual house price £530,832. The new average price means that the average asking price has gone up by about £40,000 within two years. The average house price is expected to rise in the entire UK as households face strict budgets following the increasing costs of living and interest rates. Check out house prices in London. https://expatrist.com/how-much-does-a-house-cost-in-london/ Why Houses in the US are Cheaper Than in the UK? The US is the second richest country in the world, but it's nowhere close to the UK in terms of house prices. Houses in the UK are 16.5% more costly than in the US. With an average house price of $340,000, the US property is much lower than the British. The average cost of a one-bedroom flat in the UK is about 3.35% more than in the US. The reasons behind the low prices of houses in the US are: The US has less strict building measures. In the US, you can build anywhere from the woods to the island, provided you legally own the land. In the UK, you must get planning permission, and your house must meet the building regulations. Additionally, you cannot build anywhere. Limiting where people can build reduces the supply of homes leading to an increase in demand and prices of properties. The US has so much land, hence it has plenty of space to make many houses. Even if demand for houses rises, it will never exceed the supply. Therefore, homes are always cheaper in the US. The UK has little space for building, so the demand for housing exceeds the supply. Property development in the US is mostly done in the rural parts of the country, far from the cities. There, the land is extensive and affordable. Additionally, the building materials are locally available and cheaper. Houses in the US use timber and wood, readily available materials. UK houses are built using stone and brick, whose prices have been on the rise since 2021. Read more about real estate costs in the US in the article on home prices in California. https://expatrist.com/how-much-does-a-house-cost-in-california/ Will House Prices in the UK Drop in 2022? Before buying or selling a house, it's important to know what might happen to property prices and whether the time is right to take that step. A change in house prices is beneficial to both first-time buyers and property owners. While a drop in house prices can save you a dime as a buyer, an increase guarantees you good returns as a property owner seeking to make a sale. 2021 recorded an 11% increase in house prices in the UK fueled by the stamp duty holiday and changes in work habits due to the pandemic. Will this rise continue in 2022? Whether house prices will drop or rise in 2022 will be determined by: The overall health of the economy The global economic market impacts the cost of living. An unstable global economy leads to inflation. The ongoing war in Russia comes with a shortage in supply of all commodities worldwide, leading to inflation. The UK will try and curb this inflation by hiking its interest rates to meet the supply costs. This increased interest rate will make loans expensive. What does this mean for the property market? Homebuyers will not be able to acquire loans to buy houses. Alternatively, the high cost of living will make people prioritize other basic needs. As a result, the demand for houses will drop, and so will the prices. Interest rates The Bank of England is responsible for setting the base interest rate. A low-interest rate means a lower cost of borrowing. When interest rates are low, the demand for houses goes high because people can afford them. The Bank of England made a 0.25% rise in interest rates, raising it to 0.75%, with more increases expected within the year. This rise means mortgages will become costly, leading to a decrease in property demand and a drop in house prices. However, experts predict that the high-interest rates will not affect demand as much. Buyers will find larger deposits or drown themselves in high debts because of a shortage in supply that has been on the low for a long time. No wonder the UK continues to record increasing house demands despite increased interest and mortgage rates since December. Imbalanced supply and demand House prices depend on the number of houses available for sale and the number of people seeking to buy. If the demand is higher than the supply, prices will rise. Asking prices for houses in the UK made a £7,800 increase in February, one of the highest ever recorded monthly increases which defies all previous predictions that 2022 will come with a drop in house prices. England recorded a 1.1% rise in asking prices in February while South West and West Midlands saw a 1.8% and 1.9%, respectively. There's a growing demand for houses, with potential buyers making inquiries rising by 16% compared to 2021. The supply is high, but it cannot meet the increasing demand. This demand-supply imbalance will be one reason house prices remain high in 2022. There are ongoing plans to build more houses to meet the ever-growing demand, but it's not clear when the housing supply will be enough to bring the prices down. The climbing interest rates combined with increasing inflation and the cost of utilities will place a burden on households in 2022. This financial pressure will influence first-time buyers as well as investors' ability to afford houses. The UK could see a significant decrease in demand and a drop in house prices later in the year. However, judging from how the year has started, house prices are likely to remain high for the better half of the year. https://expatrist.com/how-much-does-a-house-cost-in-london/