Some of the facts and statistics used in this report belong to and are quoted by the Office of National Statistics (ONS). At the time of writing, they are correct and up to date in relation to the House Price Index (HPI). The government partly rely on Lower layer Super Output Areas (LSOAs) to help improve upon smaller area samples’ statistics.
The UK housing market has seen a steady incline in house prices. The inflation levels in the housing market over the past 20 years have been unheard of in other sectors. As of June 2022, the average price of a house in the UK is £305,000 (a 7.3% increase in house price over the past year). Despite the constant inflationary pressure that drives the housing market forward, house price inflation slowed down in June 2022.
Despite the drop in inflation, the housing market continues to be hot and competitive, primarily a sellers’ market, with more buyers than homes and members of the populace looking to upscale.
Supply and Demand theory
The economic principle of supply and demand states that when demand exceeds supply, the equilibrium point shifts and, as a result, prices rise. This is especially true for such a price-inelastic, necessity product, such as housing.
One suggestion to help with the inflationary pressure would be for local authorities to build cheaper and more affordable rental homes for first time buyers, in an attempt to reduce the demand strain. The big concern with ideas such as this is that, although renting may be cheaper in the short term, it has long term expenses and uncertainty. Factor in the fact that the current generation spend more on rent per pay check compared to any of the previous generations, and you soon see the potential problems that may come with more rental options.
Past housing crisis that shows similarities to today
In the late ’60s and early ’70s, less than half the population owned their own home and, in 1973, the barber boom occurred. In the early ’70s, house prices were around £4,975 – by the late ’70s, houses cost a staggering four times that amount at £19,925. The reason this was such an issue was because house prices increased significantly compared to most wages, making housing unaffordable. Currently, in 2022, we are experiencing a similar cost of living crisis, with many people going on strike, because inflation is rising quicker than their pay rate, meaning their wage has less value. Strikes have included the railway workers and postal services. Due to the cost of living increase where produce becomes more expensive, most people’s wage will have remained stagnant. Thus, people are getting less for their money.
Some suggest, including Rightmove, that house prices could start to deflate towards the end of 2022; however they believe that prices will still be 5% more expensive than at the end of 2021. Growing speculation has amounted, which suggests a housing crash could occur, popping the inflationary bubble. Lloyds predict only a 1.8% price increase in 2022, which also suggests an expected price drop in housing during the second half of 2022. In 2023, house prices are predicted to deflate by 1.4%, which suggests the market will have reached its cap for now.
Points of interest
Some modern council flats are being offered, or are being installed with, solar panels. This is quite a clever way to potentially save money in the long term, as well as help the government meet their carbon emissions target by imploring green energy. It may also help thwart an energy shortage with excess electricity going to the national grid. We have started to see some solar panels offer a solar battery; the battery offers a way to store excess energy produced, so you can use it at a later date, as opposed to sending it to the national grid.
Potential subsidisation could be the key to making solar panels and renewable energy a more attractive proposition to the average UK household. This comes at a time where energy prices are about to skyrocket and the government are rebating money in a short-term method of solving the energy crisis.