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Why are property prices rising so fast?

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Property expert Nigel Lewis explains why the UK market is currently seeing significant gains

Until quite recently the property market was trundling along quite nicely, but over the past year or so prices have started to take off all over the UK[1], driven by two key trends.

First of all, the number of houses being sold has dramatically decreased; at the moment 10,000 fewer homes are being sold every month[1]. Secondly, the number of people chasing property has risen by 22%[2].

The outcome of this imbalance is being seen on pretty much every street. Except for parts of North Wales, a handful of northern towns and Middlesbrough, all regions and areas of England and Wales are seeing rising house prices.

Nationally, prices are rising by an average of 5.4%, led by London. There, the number of homes sold has dropped by up to 50% in some price bands, pushing up house prices by 9.2% a year[1].

Some of the hotspots are less predictable. For example there’s the East of England, where prices are rising by 7.8%[1]. It’s a place not normally associated with property booms, but right now it’s the hottest property market after London.

Also Berkshire, and in particular Slough and Reading, are in double figures, plus there’s the London boroughs of Barking and Dagenham (+12.6%) and Hillingdon (+15.2%)[1].

Good news for investors

All this is encouraging news for property investors with portfolios, particularly if they are hoping to leverage existing properties to fund expansion. The value of their assets is rising swiftly, as is their income – annual rent increases have hit 5.6% this summer, the fastest rise since records began in 2009[3].

Some say the chancellor’s changes in his recent Budget will dampen down this market. But I don’t think so. Tax breaks for investors in property are still fairly generous, rather than being very generous.

George Osborne’s first change – to reduce the rate at which relief is granted on mortgage interest payments – will only impact investors who have large mortgages. Also, the new ‘wear and tear’ allowances still enable landlords to claims expenses they have actually incurred, just not those they might have.

Such minor reductions in profits for investors pale into insignificance when compared to their asset gains, which on average total £9,807 per property, per annum in the UK and £44,327 in London[1]. So while this continues and rents continue to increase, property investment still has a bright future.


[1] Land Registry House Price Index, June 2015.

[2] Right Move House Price Index, July 2015.

[3] LSL Buy to Let Index, June 2015.

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