By the end of 2015, the price of properties had increased at the fastest rate since January of the same year. According to the Land Registry, the biggest rises centred on commuting towns just outside of London, fuelled by homebuyers looking for homes that are affordable and within reach of the capital.
In December 2015, the average prices of properties in England and Wales was £188,270, meaning that prices were £11,318 more expensive compared to the year before. With an annual increase of 6.4%, this is the biggest year-on-year rise in property prices since January 2015, when they had increased by 6.6%. In London, the prices of properties are increasing at nearly double the rate compared to the rest of the country.
It was calculated that the average home in London cost a massive £514,097; a 12.4% increase on 2014 levels and a substantial 2.1% rise compared to the month before. The results seems to be more people than ever looking for properties just outside of the capital as they are much cheaper; however, the upshot has been that prices of properties in commuting towns have inflated at a faster rate.
All this being said, the amount of new instructions for surveys was at a low for the majority of 2015, and only started to slightly increase in December. Jeremy Leaf, who is a North London estate agent and a former Chairman at RICS, has expressed his concern towards the decline in the number of property transactions:
“The selling and buying of properties effects the economy, if people are unable to buy and sell in the property market then there will be an inevitable knock-on effect. It is likely that this situation will not change anytime soon as the cost of moving is high, there is a shortage of supply and due to a harsher mortgage criteria, there are many affordability issues.”
Leaf has also commented on how the lack of housing in London has resulted in the exodus towards commuter towns:
“Purchasers are finding properties that have a better value than those in London, but if property prices continue to increase then this may no longer be the case. Trains to Paddington from Reading take only half an hour, making the town a rather popular place to live.”
Whilst the prices of properties in all regions have substantially increased since 2014, the North East has had just 0.8% increase in property prices. In December 2015 it was determined that the average property costs just £99,069.
Earlier this week, Nationwide produced a report that showed prices continuing to rise at the start of this year; they have suggested that the rapid increase of prices in the UK property market have shown no signs of reducing in the year ahead. Nationwide has estimated that the average price of properties in January was £196,829.
The apparently unstoppable increase in house prices has given confidence to many homeowners that their properties will rise in value during the year to come, but what effect will this have on our economy? Are the rises sustainable? How long until the bubble bursts?
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