United Kingdom Housing Prices Trends

United Kingdom Housing Prices Trends
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December 7, 2021
Understanding the dynamics and relationship between historical prices and the external environment is essential for any investor. It allows him to exercise better judgment over his decisions and pick the best kind of investment relative to the market's underlying conditions and risk tolerance. Accordingly, one of the kinds of investments that have been greatly affected by changes in the market is the housing market. Throughout the years, the fluctuations in the housing market have been heavily affected by the various domestic and international events, policies, and circumstances that directly or indirectly caused changes in its accessibility and profitability, among others. In line with this, the succeeding sections of this paper will focus on showing the effects of various fiscal, social, and political policies that happened back in 2010 and those leading to the current year. The author believes that the prices, profitability, and turnovers in the housing market back then were caused by the UK's deteriorating economy.
Overview of Pre-2010 Housing Market
As stated earlier, a historical overview of the viability and profitability of the housing market would show a significant decline in the housing market prices in the year 2010 (Figure 1). In one study conducted by the Nationwide Building Society UK, it was apparent that after the sudden and significant increase in prices starting from 1996, the growth stagnated and experienced a quick drawback from 2008 until 2010, before the market recovered.
Accordingly, the trend that caused this shift started as early as 2008 of the Economic Depression that happened back in 2008 in the United States. The panic among buyers has caused a significant decrease in demand and increase in supply that housing prices have significantly plummeted in the UK. In 2010, another significant decline and stagnation happened due to a significant fiscal policy that the government implemented. Specifically, this refers to the UK government's withdrawal of the MIRAS (Mortgage Interest Relief at Source), which has existed since 1983 CITATION Dor21 \l 1033 (Dorling, 2021). This tax relief was initially granted to couples who were purchasing houses, thereby causing a rush in the market until the year 2010.
However, because of the momentum of housing sales in the United States, the cutting of the MIRAS scheme has caused another decline in the demand and an increase in the supply of the available housing projects in the country. In one study done regarding the matter, it was estimated that "asking prices" for new sellers back then was reduced by 3.2%, yet such reduction had a small effect on curbing the number of unsold properties in the market, which caused prices to go down and the interest to go up.
Figure SEQ Figure \* ARABIC 1 - Housing Market Historical Trends | Image taken from UKANDEU.Com
The 2010 Housing Market
After the decline of 2008 and the stagnation of the market in 2010, UK property prices have consistently increased from the year 2010. As can be seen in Figure 2 below, historical prices in the housing market post-2010 have experienced a consistent increase both in terms ...