UK house prices rise
UK housing sector driven by low-interest rates and increased buying by the first time buyers –grew at a rate of 3.7 percent in the initial three months to August 2018(Halifax data). Low borrowing costs led to rise in sales. First time home buyers increased two folds in the year as compared to 2009. Buyers grew 3 percent in the first half of 2018 as compared to H1 2017. House prices grew for the first time hitting £230,000 in the last three months due to a supply shortage, where the consumer confidence remained fragile; in addition, buyers were concerned over rate hikes.
ONS claimed the prices grew (per annum) at the rate of 7.5 percent since 2009, and house prices fell 0.6 percent in the month of June.
Wage growth and elderly residents shifting to cheaper housing markets
London rates have not changed much in last few months but there are a number of factors responsible for price growth in the region e.g. growth in wages and internal migration from London, that resulted in an increase in price in the capital.
In the 1970s, economic boom caused a rise in UK home prices, which grew significantly. London prices have always been two-timing the rates in the North (in places like Humberside and Yorkshire). London continued to lead the boom in properties over the last few decades due to a number of reasons.
Growth in income in the last few years caused double growth in home price, although, home prices exhibited extreme volatility as compared to incomes. The number of people leaving the capital city increased significantly 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. London gets foreign investment from property buyers from overseas -from Africa, the Middle East, US, China, and other EU countries. Fundamentally, the rates are highly exaggerated by the fact that the properties are of investment class and interest rates impact the prices. The inflow of foreign funds into capital led to 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 claimed the demand and prices were robust in the duration in the South East and London in the months from May to August. The market was restricted by a lack of urgency, high transaction prices, restricted mortgage borrowing, and Brexit uncertainty. The builder claimed it bought five new sites in the phase. Previously, Berkeley was expecting a fall in pre-tax profit up to 30 percent but the results were better in the year.
Another homebuilder Barratt Developments reported a rise in profits by 9 percent per annum. The builder reported they were planning to construct 20,000 homes (per annum) in the coming years.
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