Why Are House Prices so Expensive?

Many people believe the uplift in the property market is because of the stamp duty holiday, but this can’t be the only reason.

1% interest rates have really stimulated the property market, as if you are trying to save you are almost getting no interest, investing in property is a much more viable option right now.

People haven’t been spending like they usually would, their outgoings have gone down. They are perhaps sitting on larger amounts of money that they then want to use to invest.

Inflation for the next period is still uncertain, it’s quite likely that any cash people have saved right now will actually be worth less in 12 months, this combined with almost 0% interest rates means people will lose money. Property is a way of not only protecting this cash but actually increasing it if inflation does increase as predicted.

There has also been an influx of foreign money coming into the UK, there are lots of countries across the world that have either 0% interest rates or negative, which means they will be paying for the bank to hold money, so people are taking their money out of banks and into property.

There is a huge need for more housing in the UK and the pandemic has increased the rate of disused commercial buildings, the government have relaxed planning rules around these types of conversions to help alleviate the pressure.