An Overview Of British Housing Market


Growing population, the lack of resource as well as the economic depression have a great deal of adverse influence on the quality of people’s daily life. Because of these, citizen began to worry that they do not have enough food and shelter. Additionally, between 1997 and 2006, there were unprecedented increases in house prices in many developed countries, and a large amount of global liquidity flowed into the housing sector. Britain's housing market is also in trouble, with unaffordable house prices and depressed construction activity. Therefore, House price which has become one of main problems need to be addressed in recent years. This essay will present recent housing market trends in UK, identify the principal drivers of house prices and housing construction in terms of demand for housing and housing affordability, provide inter linkages between housing and the economy and predict future performance of housing activities in the UK.

Recent Trends in British Housing Market

Housing price

For two decades, House price in UK market has been presented by turbo-growth. Some evidence have been showed from the report of RICS and Nationwide. There is a sarp increase in house price. Compared with UK average price (£227, 000), the average house went approximately 500% from £98, 000 in 1998 to £485, 000 in 2018. Furthermore, except for the trend of decline in 2009, it has been on the rise during this time.

Between 2005 and 2018, it can be seen that the trend of housing price price is unstable. There is a lowest level in 2009. What’s more, it is obvious that UK house price inflation moderated from mid-2016 to early 2017. In the last ten years, the average house price in Britain Inflation remained fairly stable, running at 4. 5% to 5%. However, price growth weakened further recently, with annual data falling to 3. 9 percent in the year of 2018 (PwC).

The UK house price in different region present different performance. Compared with metropolis, the small cities housing prices appeared the biggest gains in 2018. According to the latest figures from the office for national statistics, house prices in Newport with 130, 000 residents where have many cathedral and university towns soared by 14. 5% in 2018.

After Newport, Glasgow's average price went up by 9. 3% to £135, 000. Edinburgh, in third place, saw prices jump by 7. 3% to £262, 000. Manchester house prices rose by 6. 9% to £183, 000. It comes in fourth place.

Meanwhile, London, Aberdeen, Preston and Cambridge are among the cities where housing prices have fallen in the past year. A dramatic decline could be seen in Aberdeen average prices, dropping by 6% to £157, 000. London house prices fell by 1. 7 % to £474, 000.

Housing Construction

Persistently rising house prices could be driven by a number of factors, but one of these has been a lack of new housing supply. To further investigate this we have carried out new analysis at the local authority level, which suggests a clear link between lack of new housing supply, relative to population growth, and local house price growth since 2011 (PwC). This has been particularly marked in London, where we estimate that around 110, 000 additional homes would need to have been built between 2011 and 2016 to keep up with population growth.

The general consensus of housing market analysts, which was also accepted by the government in its housing white paper last year, is that there is a serious shortage of affordable housing in the UK. The fact the UK average house price to earnings ratio has gone back to its pre-crisis peak is one indication of this problem and, in areas like London, Oxford and Cambridge, the affordability challenge is clearly even more severe.

Several factors have contributed to the sustained rise in prices. However, the lack of new housing supply is the one of main factors. Because of population growth, there is a clear link between inadequate housing supply and local housing price growth since 2011. This is particularly in London, where experts estimate more 110, 000 homes could need to be built between 2011 and 2016 to keep pace with population growth (PwC). Additonally, The composition of new homes has also changed significantly. The social housing completion rate has fallen from 47% in the 1970s to an average of only about 20% since 1980 (PwC). The overall decline in the number of homes being built also means that the absolute number of social housing units being built is at an all-time low. This, and the effect of the right of purchase on the transfer of social rental shares to other leases, has contributed to a steady decline in the number of social rentals as replacement work has not kept pace. Those were sold. The rise of the private rental market is also a factor in the recent rise of the private rental industry (PwC).


  • Residential Transactions

The figure below reflects the changes in the housing market over the past 13 years. It is notable that residential transactions fell sharply at the end of 2007, a period that coincided with a slump in the housing market and a credit crunch. Until then, the number of deals had been rising. In addition, in the past few years, it finally went up a peak of about 150, 000 per month. From December 2008 to February 2014, the seasonally adjusted data showed a slow but steady upward trend. Seasonally adjusted, there was a significant peak in December 2009. This is mainly due to the end of the Stamp Duty Land Tax 'holiday', and the tax threshold raised to 175, 000 during this time. A smaller peak occurred in 2012 in March and April 2012 due to relief first-time home buyers. March 2016 presented the highest number of transactions in the past decade. The peak had a strong relationship with an increase in home prices in April 2016.

  • Non-Residential Transactions

The ups and downs in the non-residential property market are largely similar to those in the residential market. The credit crunch effect in 2007 had a similar effect on transaction volumes. According to the trend of non-residential property transactions, there has been an upward trend since September 2013. Unlike the housing market, there have been no temporary tax reliefs or 'holidays' in recent years to change underlying trends. The seasonal pattern in the residential market is more pronounced than in the non-residential market, where trends typically begin with a low point at the beginning of a calendar year.


For first-time buyers, the average home price is more than five times the average income. Additionally, there are also regional differences. The ratio of house prices to income in London is more than 10 times. Because of this, although London property is getting cheaper, it is still very affordable. furthermore, in many parts of the UK, some potential buyers are excluded from the market because house prices are high above average incomes.

The mortgage payment helps the buyer improve his buying ability. mortgage payments as a percentage of income as an indicator is used to show housing affordability. According to statistics, first-time buyers of a large number of mortgages, mortgage payments accounted for a large proportion of mortgage payments. A mortgage is a percentage of the income of a first-time buyer. As a result of the 2009 rate cut, mortgage holders have access to lower interest rates, which makes mortgage payments cheaper. However, when interest rates rose, rapidly rising mortgage payments took a big hit. In addition, with the rising house prices, buyers also need to save more money. That means many people who might be able to afford a mortgage won't be able to get one in the first place.

The deposit required has risen particularly for first-time buyers. from 10% of purchase price in 1995 to 23% in 2012.

Housing Tenure

Housing tenure can be defined as the legal status of a person's right to own a accommodation. There are two forms of tenure: The first one is Home ownership: this includes homes directly owned and mortgaged. The other one is renting: including social renting and private renting.

The data below shows the differences in tenure in different areas. In all of the areas in the lower part of the area, there's the highest percentage of social housing in London and in the North East, and in the South East, it's the lowest, only 13%. in addition, in terms of the family of the private rental sector, the highest proportion in the London region (20%), it’s home ownership minimum of 56%. however, the South East has the highest rate of Home ownership (74%).

The Principal Drivers of House Prices and Construction in Britain


In 1991, Britain had a population of 47. 5 million. However, England's population was 54. 5 million in 2016. Britain's population grew by 16% during that period. A rise in the number of household is expected to push up house prices by 32%. In addition, Increase in Net migration

Also is a key factor leading to population growth. The number of non-british born people in England increased by 4. 8 million during the same period. The growth of Britain's non-british population is expected to increase the British home prices by 21%.

Consumer Confidence

While consumer confidence has not had much of an impact on household spending, it has been an important factor in influencing households' willingness to make secured loans. Surveys of consumer confidence explain two-thirds of the change in annual house price growth. The current high level of confidence is consistent with annual house-price inflation of 12% for the rest of 2000. Because the future value of rising house prices will increase consumer confidence. According to statistics, the interest rate of loans has a great impact on consumer confidence by having effect on buying sentiment. A one-percentage-point fall in interest rates usually adds one and three percentage points to that confidence. A one-percentage-point fall in interest rates usually adds one and three percentage points to that confidence. This will affect the propensity to make secured loans in turn.

The Correlation Between British Economic Prospects and Housing

Investment in home construction creates jobs for construction workers and workers in related industries, with knock-on effects. But construction, one of the first industries to fall into recession, tends to be highly cyclical. Since the financial crisis relied on the financial crisis, operating rates fell sharply in 2007 and 2008. To revive construction, the government responded with counter-cyclical measures, with some recovery from 2009 to mid-2010. Housing investment and other options. Labor mobility and business needs.

The study found that 12 percent believe housing costs have an impact on their ability to work outside the home. Many surveys show that 17% of British firms think inadequate housing will have a negative impact on their business. And the effect was most pronounced in southern and London. Smaller businesses with 19 per cent turnover of 1 million to 2 million and 28 per cent in the services sector were more affected by the housing shortage. In addition, the five companies identified housing prices as an important constraint on business expansion in the region. The possession of adequate housing also contributes to a macro balance between growth and inflation. There's evidence that the rising of house price tends to lead to overall inflation by effecting on wages and other prices.

Policies influences to Housing Activities in the UK

Policy changes affecting housing tenure

The government enacted a number of policies that had an impact on the status of tenure in the United Kingdom. This includes options, stock transfers and mortgage tax relief. The policy, introduced in 1980, allowed many tenants to buy their council-owned properties at a discount. In the UK, 1. 76m homes have been sold since the launch of RTB.

Stock transfers

Since 1988, local authorities have transferred ownership and control of their housing stock to registered social landlords, transferring at least 970, 000 homes in England. Instead, local authority has transferred some of their stock to finance for fiscal reasons. For example, reducing public borrowing and increasing private finance for that improvement of housing quality. Although most of the proposed transfer is successful, but in some areas, the tenant voted against this choice

Mortgage tax deduction

The mortgage tax, or the mortgage interest deduction, or the MIRAS, would allow the borrower to get a tax relief on the first 30, 000 pounds on the mortgage. It was abolished in April. In 2000. The repeal significantly reduced the longstanding financial bias toward home ownership over renting. The metro is one factor contributing to the decline in private rentals. Tor and it are also the main drivers of homeownership. While metro has ceased operations, capital gains and estate tax arrangements still favor home ownership to some extent.

Mortgage tax relief

Mortgage tax relief (MTR) or Mortgage Interest Relief at Source (MIRAS) enabled borrowers to get tax relief on their mortgage interest for the first £30, 000 of the mortgage. It was abolished in April 2000. This abolition significantly reduced the long-standing fiscal bias in favour of home-ownership over renting. MTR was one of the factors that contributed to the decline in the private rented sector and it was also a major driver of home-ownership. Although MTR has ceased, capital gains and inheritance tax arrangements still favour home-ownership to a degree.


In addition to these policies, the government has formulated various programs. These schemes generally focus on l. The cost of owning a home for the first time, such as sharing ownership; Or provide an additional level on the ladder of ownership, allowing people to buy a portion of the social rent. In addition, 'buy and let' mortgages (1993) have increased the size of the private rental sector by making it easier for small-scale owners to obtain financing.

In addition to tax benefits and the sale of council housing, there have been a variety of government programmes to promote wider access to home-ownership. These programmes have generally focused on lowering the cost of home-ownership to first time buyers for example shared ownership; or providing additional rungs on the ownership ladder i. e. by allowing people to buy a stake in their social rented home. In addition the introduction Buy-to-Let mortgages (1993) has made easier to secure finance for small-scale landlords which has resulted in an increase in the size of the private rented sector.


In conclusion, this essay discusses the British real estate market from four aspects. The previous figures show that house prices in all parts of the UK, except London, are on the rise, with only London showing some declines. Yet housing is still hard to afford for londoners. In order to adjust the housing market, the government and private enterprises have changed their housing policies, loosened regulations and adjusted the credit threshold. But the housing market is still struggling, not least because of weak construction activity and empty homes. If the government joins forces with the private sector in these efforts, Britain's citizens will get more housing.


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10 December 2020
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