"Why are house prices rising so quickly?"

http://www.telegraph.co.uk/finance/personalfinance/houseprices/10840228/Why-are-house-prices-rising-so-quickly.html


Within the past five weeks, house sellers in England have added nearly 10,000 GBP to their asking prices.  This is the largest monthly increase on record.  Asking prices for homes in both Wales and England have increased by 3.65 (by 9,409 GBP) from April 6th to May 10th.  This large increase means that for the month of May, the average property for sale is priced at a record high of 272,003 GBP.  The supply of new properties for sale is continuing to struggle with keeping up with the high demand.  Across the UK, London's housing market has inflated the prices by 16.3% through the year to date, adding an extra 80,000 GBP.  In the rest of the country, the increase remains at a modest 4.9%.

We have recently discussed Urban models in class.  In this example, I see that the prices in the central business district are the prices that have risen exponentially.  Due to the lack of houses on the market, sellers are able to increase their prices, knowing that families are desperate to jump on a house that they see.  In these cases, I think that upper middle-class families will be looking to live in the city.  This is largely in part that they are the people that will be able to afford the rising housing prices.  We have also  discussed in class that when the supply is low, prices of a good will go up.  With the high demand for houses and low number of sellers, the situation accurately describes a supply and demand model.

The fall in number of new sellers is said to be largely blamed on the high number of bank holidays over the last month, encouraging people to take a holiday rather than sell their home.  Britain does not have enough housing to meet the demand of its ever growing population.  The Government's Help To Buy Scheme allows first-time buyers and home movers to borrow up to 20% of the property valued with a 5% deposit and interest-free first five years.  This has increased the number of first-time buyers by 24%.  This huge growth feeds through the rest of the property market, fueling demand.