hollywoodtone.blogspot.com Average UK house prices rise to £250,000, will the bubble burst?
hollywoodtone.blogspot.com Average UK house prices rise to £250,000, will the bubble burst?
Government figures show that the average price of a house across the U.K. has hit £250,000 ($420,000) for the first time.
The house price figure, supplied by the Office for National Statistics (ONS), relates to the end of the fourth quarter of 2013. If house prices are a measure of economic recovery (an arguable point), then prices are now 1.6% higher than in the pre-financial crisis peak in January 2008. For 2013 alone, house price inflation was running at 5.5%. Why have the prices gone up? The triggers are probably a combination of U.K. Government stimulus in the form of Funding for Lending, which made money available to bank and building societies to offer mortgages, and the more recent Help to Buy schemes have helped to drive up prices. Some see the rise as good news and sign of a healthy economy. Howard Archer, chief European and UK economist at forecaster IHS, quoted by The Daily Telegraph, says "Housing market activity is being supported by substantially improved consumer confidence, markedly rising employment and extended low mortgage interest rates and is still being fuelled by the Help to Buy initiative." However, there are some points of concern behind the figures. The biggest concern, The Guardian ponders, from the figures is that the rises are unsustainable and that a 'house price bubble' could develop. So, what is a housing bubble? According to Investopedia: "Traditionally, housing markets are not as prone to bubbles as other financial markets due to large transaction and carrying costs associated with owning a house. However, a combination of very low interest rates and a loosening of credit underwriting standards can bring borrowers into the market, fueling demand. A rise in interest rates and a tightening of credit standards can lessen demand, causing a housing bubble to burst." A housing bubble is not a good thing. It can leave people with mortgages, that they could be struggling to pay because they took on loans that over-stretched them, for houses that are worth less than their mortgage loans. Another important factor is that house prices become affordable for those on average wages. According to the BBC, the campaign group Shelter said: "Until we build enough homes to keep house prices stable, more young people and families desperate to put down roots will see a home of their own become a distant dream." With any economic data, there are ranges. With house prices, the U.K. growth is fueled mainly by properties in the London area and surrounding south-east England. In other areas, growth has been slower. In Scotland, for example, house prices have only risen half-a-per cent. As with any headline figure, there are complex issues at play.
hollywoodtone.blogspot.com Average UK house prices rise to £250,000, will the bubble burst?