House prices in the UK have been on the rise since 2011. In January 2016, house prices were 7.9% more than those in 2015. The prices in 2015 were also 6.7% more than those of 2014. The increase in house prices is a trend that is clearly visible from 2011. This trend would continue for an unknown period of time. But this was not to be. In the late months of 2016, changes in house prices became erratic, with some regions reporting increases while most recording decreases. The sudden change in the trend in house prices is majorly attributed to the Britain’s decision to move out of the European Union. However, other factors play a role in influencing UK house prices.
Demand influenced the house prices in the UK for a long time. Many people have migrated to the UK to seek better pastures both academically and professionally. European Union made it even easier for people from countries within the EU to go to the UK. As such, demand for housing has for a long time been on the rise. The supply aspect of the UK housing market responded to the surge in demand by increasing house prices. This is a natural obedience to the laws of supply and demand. Such has been the scenario from early 2011 to the beginning of 2016.
Increased prices of housing have not failed to capture the attention of the government. High house prices affect citizens of the UK as well as immigrants who come to explore opportunities within the UK. The effect of high prices has been so drastic that even British citizens have been affected. This has raised an outcry among young people who are in need of homes. The government of the UK has responded to increase in house prices by offering financial help to people. Financial assistance provided by the government includes equity loans for home purchase, Housing Association funds for shared ownership, and mortgages. These may not have reduced house prices per se, but have encouraged more people to buy.
Effects of Brexit
Brexit came about in 2016. It affected house prices drastically. Since late 2016, house prices in the UK have been dropping in most cities. The decrease in growth of prices can be due to the uncertainty that the stakeholders of the housing market have on the effect of Brexit. Terms of Brexit will not be complete until Article 50 is fully implemented. This might take up to two years. Till then, it cannot be predicted with absolute certainty what house prices will be. Various scholars have come up with possible trends that the house prices might adopt.
Many players in the real estate market foresee a steady fall in house prices in 2016 and 2017. This is expected to occur in most parts of the UK. Those parts of the UK that are still experiencing emigration might continue to have price growth. The trend in house prices is expected to stabilise after terms of Brexit are fully implemented.