Why do House Prices Rise & Fall?
Isn’t it an ever so popular headline in our dear msn news outlets, house prices! The likes of newspapers and property blogs love to grab readers via sensational breaking news headlines such as ‘House price crash looming‘ or ‘House prices rising faster than savers can save‘… you get the picture no doubt. I always found that it was the good old Daily Express newspaper that loved the glorified house price headlines.
Most of these headlines are very much dependent on what data source is being referred to especially when comparing asking prices to sold prices as well as needing to consider over what period the data is grabbed from or what period of time stats are being compared to. For example, a title of ‘House prices fall in the month of August‘ could simply mean that the rate of growth has fallen over there being a negative growth – Many times you need to read the small print or follow the ‘*’!
So what really causes house prices to rise or to fall?
Demand: It is the source of all rise and falls in almost all services and products we sell. Create a demand for something and you create a value for it. How many people are seeking to buy and how many are seeking to sell!
Stock Level: We could tie this in to the ‘demand’ section above in that how much stock there is and how much demand will very much sway the market to a positive growth or opposite. With a high demand and low stock you will get property prices rising and little demand with high stock you will get a stagnant market and likely to see prices fall.
Economy: The national and sometimes international economic climate will also have a great effect on property prices. What is the mood like out there? What level are interest rates? How easy is it to borrow? Dreaded words such as recessions and depressions can heavily effect the mood of the property market.
Current Affairs: What is happening in the world can also have a say on how house prices perform. The likes of wars, strikes, poor performing governments and more tend to send waves through the property market.
Timing: There are peak times to sell and purchase in the world of property with slower months such as Summer time (when everyone is busy with holidays) to busier months such as those in Spring and Autumn. Though we can not rely on these as gospel such as more than £37bn worth of property sales were agreed in the UK in July – People tend to look to move at the less inconvenient times and also to be in time such as moving in prior to Christmas or looking to move in Spring time ready for the summer etc.
Local Factors: House price headlines are usually referring to the country’s average, though regionally there can be certain swings that buck the trend. New local travel routes can for instance increase house prices or even the mention / proposals of – for instance ‘Property prices have doubled along the Elizabeth Line‘. How that new Waitrose being built down the road or celebrity spotted viewing property!
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