UK Housing Market – Reasons Why It Is Not Heading For A Crash

Low interest rates

Despite interest rate hikes over parts of the year 2007 we are still (and have for a very long time) in a time of relatively low interest rates. Current rates of 5.25% is still incredibly low regard in the late 1980s and early 80s were well into double figures, reaching 15%. This had a critical impact on people monthly mortgage repayments, leading to large numbers of mortgage defaults and repossessions.

Limited supply of housing

In contrast to manyother countries (for example, the United States) in the UK is actually a very small area geographically you consider how many people live here. Space for new homes, building in particular in urban areas, is extremely limited. This has the simple effect of limiting the supply of new housing that comes on the market

Increased demand for real estate

With a growing population, the demand has never been higher. Many point out to the large number of immigrants in the United KingdomEastern Europe than with a large effect on the demand for housing. Even if these migrant workers do not buy, they still have to live somewhere, namely in rented or buy to let accommodation.

The net effect will this increase in demand and limited supply of naturally push prices higher. Obviously, the higher real estate prices move, the less affordable housing for people with low incomes. However, prices have not fallen? The reason can be explained by the recent buying boom Rent buy propertypurchases. Many individuals on relatively high incomes have entered the buy to let market and become landlords. More often than not their prospective tenants are those on low incomes that simply can’t afford to buy.

As can be seen there are many reasons why the housing market may not be destined for a crash. Although a slowing economy may have an effect the fundamental indicate that a crash may not be the certainty that some people feel is just around the corner.