The Property Market In The UK


Image showing some houses in the property market in the UK

Investing In The Property Market In The UK


Learning about the property market in the UK can be the key to getting a good deal when you want to buy a property or sell your house faster.

Fluctuations in the UK property market vary locally as well as nationally and these can greatly affect local property prices, including how much your house is worth.

The Average UK House Price

The average price of a house in the UK in August 2021 was around £264,000 according to the Office of National Statistics. Not surprisingly, London was the most expensive area for houses and flats where properties were around double the average price asked in other parts of the country.

In January 2020, ten out of twenty of the most expensive streets to buy property were located in London. This makes what used to be a cost effective purchase, such as buying a flat in London, very expensive for those on a normal wage.

Image showing UK house price growth
In August 2021 UK house price growth was 10.6% according to the ONS. Source: HM Land Registry, Registers of Scotland, Land and Property Services Northern Ireland, Office for National Statistics.

University cities like Oxford and Cambridge were also in the most expensive bracket with the average price of a property in these cities coming in at around £400,000.

Property in Liverpool and houses for sale in Glasgow had the cheapest prices and in these areas the average property price was around £123,000.

The main reason for high prices in UK cities is down to supply and demand. In spite of a few downturns in the market, the overall demand for housing is still on the rise and this has created a continual increase in prices.

Around 37% of people living in the UK are afraid that they will never be able to afford a property in their own home town.

Photo of a former house now a commercial property
The average price of UK property, both residential and commercial, will continue to rise in the forthcoming year. Photo © N Chadwick (cc-by-sa/2.0)

Is The Property Market In The UK Rising?


If you are considering buying a property it is important to keep up with the ever changing developments of the property market in the UK. Equally important is to be aware of local trends which may be different to the rest of the country.

In the last year overall prices in the property market in the UK have risen and property prices in the UK are expected to continue to rise over the forthcoming year.

There has been a surge in demand for properties outside of cities but the value of property in London continues to stay ahead of the rest of the UK.

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What Are The Effects Of Rising House Prices?

High property prices cause problems and in the UK the ratio of prices to salaries is the highest in the Western world. This has led to a division in society between property owners and those who rent.

Renters face ever increasing housing costs and in some cities this has forced people to move away from high demand areas and has caused a decline in available labour.

Photo of some houses in the UK
The rising price of houses in the UK has caused a division between those who own property and those who rent. Photo © Richard Dorrell (cc-by-sa/2.0)

The shortage in supply of affordable properties has forced many people to move away from their home towns and has meant that some people have taken on higher mortgages. If interest rates were to suddenly increase there could well be many new home owners who become unable to contend with higher payments.

The continual rise in UK property prices does not bode well for a balanced economy nor does it encourage a strong and stable housing market.

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How Does The UK Property Market Affect The Economy?

The property market in the UK is linked closely to the economy. Consumer spending increases when confidence is high and decreases when there is uncertainty. If property prices go down, consumers are more likely to rein in their spending due to worries about the value of their property. Equally, spending increases when house prices go up.

Is The Housing Market In The UK Equal?

Currently the property market is not equal. In spite of the recent recession caused by Coronavirus house prices continue to rise but availability of 95% mortgages is drying up. Potential buyers are being asked for large deposits which means first time buyers are struggling to enter into the market.

What Factors Have An Effect On The Property Market In The UK?

The property market in the UK is influenced by many factors. Chief amongst these factors is the supply of housing and the demand of buyers. Economic growth, interest rates and the availability of mortgages all contribute to the state of the market. In addition, unemployment is a major issue as this affects consumer confidence.


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How Changes To Stamp Duty Affected The UK Property Market


In July 2020 the Chancellor made changes to the stamp duty threshold and this had an effect on the property market in the UK. The changes were designed to encourage upward movement in the property market and helped property buyers save up to £15,000 on a purchase.

The new threshold meant that buyers did not pay any duty on properties valued at £500,000 or less. The new threshold did help buyers avoid stamp duty on a second home but were specifically set up to help first time buyers to get onto the property ladder.

Photo of a thatched house in England
The UK property market saw an increase in prices when the chancellor introduced a stamp duty holiday during 2020. Photo © Oast House Archive (cc-by-sa/2.0)

As a result of the tax changes and the Help-To-Buy scheme the property market in the UK saw demand increase especially in the area of new builds. Enquiries at new build sites went up by 51% on the day that the new scheme was announced.

Investors buying properties to increase their portfolio also benefited from the scheme as just the 3% surcharge is applied to the purchase of second or third properties as long as the purchase price is below £500,000. The stamp duty changes were effective in bringing confidence back to the UK property market.

Photo showing terraced houses in the UK
The UK housing market has remained buoyant despite concerns about other areas of the economy. Photo © Terry Robinson (cc-by-sa/2.0)

Does A Recession Affect The Property Market In The UK?

If the UK economy falls into a recession the effects are widespread and could possibly trigger a crash in the property market in the UK. The last UK recession occurred in 2008 after the world wide financial crisis and as a result property prices fell dramatically.

A recession happens when the Gross Domestic Product (GDP) falls for two consecutive quarters. This happened in the first two quarters of 2020 and officially the UK was in a recession.

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When a recession hits there is unemployment, failing businesses, house repossessions and a lowering of wages. All these factors can adversely affect the property market as people are unable to move or to invest in a larger property. Fluctuations in currency can also affect the UK property market.

Falling property sales reduces tax revenues and this in turn makes house prices fall. In spite of the recession the property market in the UK has remained resolutely buoyant but whether current events will have long term effects on the housing market is yet to be seen.

Photo of terraced houses for sale
Investing in the UK property market continues to provide good returns for buyers. Photo © Colin Craig (cc-by-sa/2.0)

Is The UK A Good Place To Invest In Property?


The UK has always been viewed as a safe haven for property investors. The potential of good returns from renting out a property or renovating a property to sell has not diminished in the last year.

Ultimately, the amount of return you can expect will depend upon where you invest your money. Away from the capital there are good signs that investing in property will give good yields.

Experts have indicated that Liverpool and Manchester are two of the best bets to invest in property. Average property prices are around £182,000 and £242,000 respectively. Annual house price growth over 5 years are currently 8.45% for Liverpool and 15.76% for Manchester.

No one can tell what will happen in the future but it is clear that the UK still represents good value for property investors. A separate analysis is available for the property market in Scotland and the London property market.

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