Find answers to questions on the property market and house prices in the UK in our complete guide.  

What Makes Property Prices Go Up and Down?

There are several factors that can affect whether property prices go up or down in value:  property market concept - houses on chart

Time

The main strength with property is that over a long enough period of time, it will rise in value. And if you opt for a capital repayment mortgage, then that will mean you are continually paying down the debt whilst the value goes up. So, debt down and value up creates more wealth for you.  

Economy

It is well known that the economy follows cycles, and a number of issues influence this. For example, if the economy has been growing for a long period of time with house prices continually rising then there is a chance that a “bubble” can develop. This is when prices have risen so much that it is not sustainable and cannot continue like this. And like any bubble, it can burst. If the bubble does burst, then prices can fall suddenly and heavily. An economic crash can occur.  

Supply and Demand

Supply and demand are also factors. So, if there is a shortage of housing and high demand, then this can push prices even higher. There is continually a shortage of housing in the UK and with a growing population (another factor) this puts more pressure on house prices. Ultimately, however, the value of a property will always go up over a long enough period of time.  

Are There Any Sources to Follow House Prices?

There are a number of ways to monitor house prices – what is usually referred to as an index of some type. Nationwide offer a house price index which is useful, as do large property companies such as Jones Lang La Salle and Savills. There also always plenty of information on the news so it is quite easy to keep up to date with property prices in the UK. Further to this, you can even get regular valuations done on your own property by a surveyor. A survey only costs a few hundred pounds normally and can be a useful metric to monitor the value of your equity and wealth, say every five years.  

Is the Biggest House Price Growth Always in London?

London leads the way in many respects. It is the economic heartbeat of Europe and has seen an extraordinary growth in house prices over the last 20 to 30 years. However, there are other areas of the UK which are now showing stronger growth. There are continual fluctuations in the market and sub-markets of the UK.   When trying to buy an investment property for example, it is very important to understand the local market. Local knowledge is important knowledge. You need to know if there is enough demand and what affordability is like. You can conduct online research through property portals such as Rightmove and Zoopla, but nothing can substitute for knowing local demand and values.   Always do your research!  

How Do I Know When Is the Right Time to Buy?

We would all be millionaires if we knew when the bottom of the market was! In reality, there is no perfect time to buy unless you have a crystal ball. But it’s worth considering how many years the market has been growing and listening to the news. Buying after a crash makes sense but you still need to know when the crash is over. So don’t jump into deep water with a life jacket!   One major question is, “why are you buying the property?”. Is it for a home or is it for an investment? If it is the former, then the market timing is less relevant because you will hold it for a long time. If it is for the latter, then it is important to pay attention to the economy as well as study the local market. Making friends with local estate agents never does any harm.   Ultimately, you can only do your best with informed judgement. Just monitor your budget and if required, seek the advice of an experienced property investor or a financial advisor.  

Should I Buy A House or A Flat?

It will again depend on your reasons for buying – if it is as a home then perhaps you will want a house. If it is an investment, then a flat may well suit. Affordability is of course a key factor so that may make the decision for you. Buying a house is more straightforward legally because you can own the property outright – you can own the freehold. If you buy a flat, you will essentially rent the property – or lease it – from the freeholder of the building.   Whichever option you take, make sure that all the figures stack up and that you can afford the mortgage repayments. You do not want to end up in a position whereby you are putting yourself in a difficult position regarding debt.  

Are UK House Prices Affected by Global Events Such as The Covid-19 Pandemic?

Yes, they are. And there is no greater example than the Covid pandemic. However, paying the closest attention to the UK economy will always be your best bet. Events in America for example will often have a limited effect on UK house prices.   In short, even though UK house prices are affected by global events, it still makes most sense by using your time to focus on UK economics as well as seeking local knowledge from agents and conducting your own research.  

Do I Need A Lot of Capital to Buy A Property?

Banks usually lend up to 90% of the value of a property. This is called the Loan To Value (LTV). Sometimes 95% can be available and there was a time when 100% could be loaned… which ended badly in the crash of 2008/09. The more you loan, the more debt you take on and the more risk you carry. It is critical to understand if you can afford the loan repayments.   Rather than take on debt to buy a property, it is much preferable to save up the deposit and have the only debt you carry as the actual mortgage loan. So, to answer the question, it really depends on the price of the property. If you can find a flat to buy for £30,000 then you will only need a £3,000 deposit.  

More Answers to Frequently Asked Questions

It can be challenging to understand the ins and outs of the property market as factors can make it change rapidly too. If you have questions that haven’t been answered here, don’t hesitate to get in touch with our friendly experts at Serene Homes.