UK house prices soar to new heights, reaching an average of £260,000 for the first time, according to The Guardian. The increase in price has been consistent for the past seven months, making it more challenging for homebuyers to find a quality home for themselves or to buy as an asset. In the last month, i.e., February 2022, the price of houses in the UK increased by 12.6% since the seven-month price growth. Thus, this article discusses this increase in prices, highlighting the primary causes and what the future may hold.
UK House Prices Soar
The prices of houses in the UK increased in February by 1.7% from the previous month. This price increase led to the average price of a house to reach £260,230. The growth rate in January was 11.2% in the past seven months since it started increasing rapidly and consistently.
In addition to that, the price of a house on average in the UK increased by nearly £30,000 in the last 12 months. This annual price growth is the highest in cash terms that have been recorded by the monthly index.
The average UK house prices soared during the two years of the COVID-19 pandemic. In terms of cash, the increase from February 2020 to the current price, which was just before the lockdowns began, is £44,140, which is a fifth higher than the price two years ago.
What is particularly concerning about this increase in average house prices is that the rate of the increase has been far greater than that of people’s salaries. Therefore, affordable housing has become a challenge, with houses costing 6.7 times the average earnings of professionals in the UK. For some perspective, this ratio was 5.8 times in 2019.
The Primary Causes of this Price Increase
While there are a number of factors that have contributed to the increase in the average house price in the UK, the most notable cause is the increase in demand for housing and limited supply. Other important factors also include rising inflation. Inflation in the UK reached the highest point in 30 years this January, reaching a percentage of 5.5%. Therefore, the overall cost of living has also shot upward, making it more challenging for average UK people to buy homes.
Another contributor to the increase in price is the increase in interest rates. However, there is a possibility that the Bank of England may not increase interest rates beyond 1% due to the economic situation vis-à-vis the Ukraine crisis. That said, there’s also a chance that the Bank of England will increase interest rates if the conditions of the labour market stay strong.
Last Few Words
As UK house prices soar, there’s less of a bright outlook on affordable housing for most people. That said, if you’re looking to buy property, it may be a good idea to look for housing sooner than later.