There’s been a lot of talk about house prices recently – plus ca change, one may say! After all with the second phase of Help-to-Buy mortgage schemes kicking into action, this topic’s hardly been out of the news. But what does this mean for those buying a house in the UK? Will there be a bubble after this artificial stimulation which will lead to an inevitable new housing boom? What will be the implications for the housing market going forward? What is the average house price in the UK? Will house prices rise in 2014? Well, on one hand, it could be argued that this is only going to increase – with The Centre for Economics and Business Research (CEBR) saying prices will rise to £225,000 this year, with a 3.9 percent jump due in 2014.
If we look a little closer at the facts, it appears that in the year to August 2013, house prices increased by some 3.8 percent up from 3.3 in the 12 months to July 2013. Despite the average house price in 2013 soaring in London, prices outside the UK capital did not increase so rapidly. Also, with the Bank of England revealing the number of mortgage approvals hit their highest level for five-and-a-half years in August, it appears that there’s still a large focus by those living in the UK on buying their own property.
One question to ask is whether house price rises are a good thing or not? Families in London and the South East may find themselves sitting on a small fortune, but the problem is that if they decide to upgrade they will not be able to get a bigger property.
So for those who got their property during a certain period, rising house prices are only beneficial for those who decide to downgrade. Plus, for young people, Help-to-Buy could cause problems later down the line, meaning that young people and those who use to scheme get burdened with debt that’s hard to pay off.
However, those in depressed areas of the country where house prices have already slumped, could welcome the boost for those trapped in negative equity. On the other hand, with properties continuing to soar in the South East and London due to the flooding of foreign buyers to the market and the lack of new housing being built, the North-South divide could simply exacerbate further, with the UK capital becoming an impenetrable bubble for essential workers.
Some analysts have branded the Chancellor’s scheme as ‘economic madness’ which will just increase the burden of debt at a time when the budget deficit shows no signs of reducing. With the cost of living spiralling and the ongoing depression of wages in the private sector specifically, supply-side reform could be much more beneficial during such straightened times, rather than further policies which will inevitably continue to inflate house prices through 2014.
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