Property prices are rising at their fastest for 7 years, but where will it lead?

The media has been busy lately reporting about house prices rising at their fastest rate since 2006 for most of the UK. The past 4 months in a row have experienced consecutive increases. England and Wales have been experiencing these increases, the highest rises being found in the South East and London (over 8% in the last 12 months). Areas that were hardest hit during the financial crash, and experienced the greatest fall in property prices, are now amongst the areas experiencing the highest rises in property values. There have been large variations from area to area regarding the increase in house prices, as can be seen with Scotland and Northern Ireland who are still experiencing falling property prices, although these falls are now only slight. As an average for the whole of the UK, prices have risen by 3.1% over the past 12 months.

The reasons why the UK is experiencing these sudden increases are due to a number of factors that are all starting to take effect. These include sustained low interest rates, which are now increasingly being passed on by lenders to their customers. In addition Government incentives such as the help to buy scheme, has been making it possible for many people who were previously unable to buy a new home to now be able to. This scheme has been available to people looking to buy a new built home, an incentive designed to help people onto the property ladder and also to help stimulate the construction industry. Clearly this scheme has been successful as the number of new homes being built is at its highest for years. This has had a major beneficial impact on the construction industry. As evidence of its success, the help to buy scheme is going to be extended next year to include existing properties and not just new builds.

A major factor for increased prices is the greater availability of mortgages and other finance facilities, without which the number of buyers would be greatly reduced, which will subsequently affect demand. Lenders have been more willing to lend over the past twelve months, offering better deals, more flexible underwriting and higher loan to values. This has been clearly seen amongst the bridging loan providers over the past 36 months.

Those who have benefited from these house price increases are people looking to sell their property, landlords who own one or many more rental properties, house builders, estate agents, removal firms, solicitors and mortgage brokers.