The UK House Prices Rise

The UK housing sector, driven by low-interest rates and increased buying by first-time home buyers, grew at a rate of 3.7 per cent in the initial three months to August 2018(Halifax data). Low borrowing costs led to a rise in sales. As a result, first-time home buyers grew twofold in the year compared to 2009 and by 3 per cent in the first half of 2018 compared to H1 2017.

However, house prices grew for the first time hitting £230,000 in the last three months due to a supply shortage, where consumer confidence remained fragile; in addition, buyers were concerned over rate hikes.  

ONS claims the prices grew (per annum) by 7.5 per cent since 2009, and house prices fell 0.6 per cent in June.

Wage Growth and Elderly Residents Shifting to Cheaper Housing Markets

London rates have not changed much in the last few months. Nevertheless, several factors were responsible for price growth in the region, like higher wages and internal migration from London, which resulted in gains in the capital.

In the 1970s, the economic boom caused a rise in UK home prices, which grew significantly. London has always been two-timing the rates in the North (in places like Humberside and Yorkshire). However, for several reasons, London continued to lead the boom in properties over the last few decades.

Growth in income in the last few years caused double growth in home prices which exhibited extreme volatility. As a result, the number of people leaving the capital city increased remarkably, and the highest percentage of the population departing includes the older age group.

Foreign Investment in London

Migration is not the only reason for home price growth or decline. For example, London gets foreign investment through overseas property buyers from Africa, the Middle East, the US, China, and other EU countries. But, fundamentally, the rates are highly exaggerated because the properties are of investment class and interest rates impact the prices. 

The inflow of foreign funds into capital led to a rise in the price where even a small flat in London costs over £400,000, whereas, in other regions such as South East, the average cost is around £200,000.

Construction Growth and Builders Register Profits

British homebuilder Berkeley claims the demand and prices were robust in the South East and London from May to August. However, the market was restricted by a lack of urgency, high transaction prices, limited mortgage borrowing, and Brexit uncertainty. 

The builder claims it bought five new sites in the phase. Previously, Berkeley was expecting a fall in pre-tax profit by up to 30 per cent, but the results were better in the year.

Another homebuilder Barratt Developments reported a rise in profits by 9 per cent per annum. The builder reported they were planning to construct 20,000 homes (per annum) in the coming years.

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