Surging UK house prices spell challenging times for aspiring homeowners

by on August 11, 2015

  • Sumo

house-prices-uk-mortgage-first-time-buyersHouse prices in England and Wales have soared to all time highs, surpassing previous records at the peak of the 2007 property boom, according to figures released from the Land Registry. The average cost of a property rose sharply by 1.1% to £181,619 in June and witnessed increases of as much as 5.4% per annum.

Separate figures produced by the Official Registers of Scotland (RoS), revealed house prices spiked by a staggering 3.5% during a three month period to June reaching £167,765. This is the highest figure ever recorded since the RoS began compiling these figures in back in 2003.

To add to this, the reduction in price inflation, currently ahead of wage growth, has led to house prices soaring to all time highs. All ten regions of England and Wales have seen a notable rise in property prices. After London, the South East grew by 8.4% with an average property price of £247,375, the East rising by 7.8%, with an average value of £203,428.

The surge in house prices can be attributed to a number of factors. The strong upward growth in house sales, which had been seen for much of 2014, dipped in November last year and has continued on this downward trend. Property sales in the first quarter of this year slumped by 13% and as a result the property “price gap” between London and other regions in England and Wales continues to escalate.

Furthermore, pre-election pledges of introducing a mansion tax, along with other promises have seemed to have scared potential buyers and has had a clear impact on the “prime” property market. Additional Land Registry data shows the total properties sold in England and Wales going for over £1m fell by 22% in 2014.

Such data has hastened calls for the industry to examine the Mortgage Market Review’s effect on residential lending, where many argue buy-to-let is at more of an advantage since it falls out with regulatory controls. Independent mortgage brokers have warned the tightening of affordability criteria could potentially squeeze out a whole generation of would be homebuyers from the property market altogether, leaving them with no other option than to rent for the foreseeable future.

Although demand for housing is rising at the moment, (largely due to the anticipated rise in interest rates), the wide scale issue of the lack of affordable housing presents something of a minefield for those trying to get onto the property ladder for the very first time.

It is clear that in order for the property market to function and thrive properly, the Government needs to ensure their pledge to create affordable housing is fulfilled. This is something desperately needed to ensure the current lack of supply does not continue to apply “price pressures” on existing stock. If this scenario continues, then the agony felt by many first time buyers looking to climb onto the property ladder is set to continue for some time to come.


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