Throughout its rich history, England has been known for many things — football, the Royal Family, and Monty Python being just a few. Now, you can add a red hot real estate market to that list. From the northern metropolis of Newcastle to ever-glamourous London in the south, housing markets in England have been trending steadily upward since early 2013.
According to Property Wire, the total value of residential properties in the United Kingdom (England, Scotland, Wales, and Northern Ireland) stood at a staggering £5.75 trillion (USD $8.7 trillions) in January 2015. That is a £543 billion (USD $838 billion) increase over the market’s value at the same time last year.
England’s South East region and the London metropolitan area have been leading the upward charge of the British housing market. The Rightmove House Price Index shows that the average property value in Greater London increased by 9.7% last year. Meanwhile, properties in England’s South East saw their average value rise by 8.1% over the same period.
Here are three major reasons why the English real estate market is showing no signs of slowing down:
1. Demand > Supply
One of the first things an economics student learns is that when demand is greater than supply, prices go up. This time-tested concept is one of the central reasons why average property values in England are projected to keep increasing for the foreseeable future.
According to the UK Department for Communities and Local Government, there were 118,760 new homes built in England in 2014. This was far below the government’s target of 240,000 new homes, creating a supply shortage and driving up real estate prices nationwide. It is expected that there will continue to be a new housing shortage in England again in 2015, meaning real estate prices should continue to climb.
2. They Don’t Want the Bubble to Burst
The real estate market in England is increasing in value at a faster rate than any other segment of the country’s economy, causing some to worry about a “housing bubble.” The federal government and Bank of England have taken note, however, and have introduced measures to help prevent “the bubble” from bursting.
Programs like the new Help to Buy scheme have been designed to help buyers enter England’s lucrative housing market. Help to Buy helps new homeowners enter the real estate market by offering qualified applicants a varied set of equity loans or mortgages guaranteed by the federal government.
Even though England’s economy is growing quickly, the Bank of England has indicated that it has no intent of raising interest rates any time soon. With programs like Help to Buy in place, the efforts made by the Bank of England to keep economic growth strong should help ensure a stable housing market for the foreseeable future.
3. Innovation in Investing
England is no stranger to innovation. Since giving rise to the Industrial Revolution nearly three centuries ago, the nation has continually embraced cutting-edge ways to do business, manage markets, and build industries. The English real estate market is no exception to this spirit of innovation.
Startups like Partner Property have allowed everyone to become a real estate investor in England. For as little as £50 (USD $80), new investors can become part of a crowdfunded real estate investment firm. Now, a real estate market which had a high entry price has been made open to all.
Carson Pfahl, a graduate of political science from UBC, is a Vancouver-based curator and freelance writer who contributes frequently to RESAAS Blog.
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by Carson Pfahl