Housing Market: Difference between revisions

'''Figure 1''' shows house price inflation by area. The average for the UK is 27%, but this varies widely across the UK regions. Greater London has seen the highest house price inflation (61.53), as would be expected, while Scotland has seen the smallest increases at just 2.82%. The graph also includes where wages should have been by 2018<ref>Wages growth https://www.bbc.co.uk/news/business-45487695</ref><ref>Institute for Fiscal Studies - 10 years on, havehad we recovered from the crash - https://www.ifs.org.uk/publications/13302</ref>, or rather how far they are behind where they would be if the economy had carried on growing. Residents of London are the hardest hit in terms of getting on the housing ladder as their wages have not kept up with general inflation while house prices have soared. Areas around greaterGreater London have also seen fairly high house price inflation, which could be partly explained by increasing house prices in Greater London pushing more buyers further out from London.

In theory, inunder normal circumstances, there should be a natural house price correction. Once house prices reach an unattainable level there should be a slowing down in growth. This has not be seen due to a number of factors. Firstly the government through [[Quantitative Easing]] has made vast sums of money available to the financial markets. It is in the interest of the financial sector to make mortgage loans with this money. While the money is made available to them at zero interest rates, they can loan the money out at much higher interest rates. This tends to lead to banks and building sitessocieties offering far higher multiples of salary to lenders to keep the money rolling. These loans then end up in the money markets where they multiple, based on the logic that prices will keep rising. Higher multiples, rather than helping lenders onto the housing market, tends to push up prices tobeyond what can be afforded. As theythe multiples increase the percentage of a lenders salary spent on mortgage repayments increases (see figure 3 for more details). Under the section [[#Government purposely Inflating prices|Government purposely Inflating prices]] you can see how, when the government have detected a slowing of housing market, they have introduced measures to ensure continued inflation.

The other factor that has played a large part in house inflation has been a national shortage of housing stock. As demand has outstripped supply this had led to an increase in prices. This has been exacerbated by the buy to rent market where the wealthier can afford to buy up properties and there is a need to rent by the younger generation as houses prices have gone beyond their means. The buy to rent market has a place, but the investment by rich landlords, and the lack of controls ofregarding the quality of that housing has led to an unbalancing of the market.