“Carpet and floor fitters say that a buoyant market means more trade and, after a post-recession slump, things have started to pick up.” On closer inspection, however, the article points out that 2015 price predictions indicate slower growth than this carpet-related theory proposes. Dropping from last year’s prediction of an 8% increase, there is near-agreement among analysts’ predictions that property prices should increase by around 4% in 2015. So what are the influences affecting the market this year?
1. The election: Elections are thought to “dampen activity in the housing market until the result is known”, as shifts in governance can cause interest rate increases. May’s general election is likely to have contributed to slower growth.
2. Public sentiment: A property economist at Capital Economics says that “his prediction of a slowdown in prices in London is partly the result of buyers simply saying "enough is enough" with homes in the capital either overpriced or unaffordable.” Miles Shipside, director of internet property portal Rightmove, believes that this shift is resulting in people moving further out of London towards the South East in search of more affordable housing.
3. Level of wage rises: How much income buyers have at their disposal is an obvious contributing factor in determining the confidence to buy. In fact, an article on Economics Help points out: “demand for housing is often noted to be income elastic” (ie. a luxury good). This results in “rising incomes leading to a bigger % of income being spent on houses.”
4. Location: Last year the UK property market grew by 7.2% (just off the overall prediction of 8%). However, it’s important to bear in mind that growth in the market varies from area to area. Whereas London prices increased by 17.8%, in Wales the market grew by only 1.4%, according to figures published by the Nationwide Building Society. Factors like proximity to good schools and transport networks naturally influence the value of a property too. As the BBC article reiterates, “desirable areas can buck market trends as demand is high, and supply limited.”
5. Unemployment: Increased employment rates ultimately lead to growth in the property market, but from the perspective of Economics Help, “even the fear of unemployment may discourage people from entering the property market.”
6. Mortgage availability: Compared to the economic glory days of the late 90s and early 2000s, banks are less willing to lend mortgages. Fewer mortgages means fewer purchases, leading to less growth. The affordability of mortgages differs from country to country. In Spain, for example, a number of low-interest loans are available to non-resident property buyers. An article in Euroresidentes highlights the advantages of buying property in Spain and outlines how they advise “leading banks about the needs of non-Spanish property buyers, (ie.) the kind of services we expect from a bank in terms of flexible banking, language support, low interest rates, personalised customer services, (and) efficient online banking.”
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