Why is the gap between UK House Prices becoming bigger ?

As the report regarding UK house prices shows, the house prices in UK have risen constantly since the recordings started in 1986. With the rising house prices, price inequality between UK regions is also growing with London being almost three times more expensive than the north east part of the UK in 2013.

But what might be reason(s) for this inequality ?

To answer that question it is simply needed to look at another spreadsheet published recently by ONS UK about total population of the UK. The figures clearly show that the population keeps growing and will also keep growing reaching slightly over 70 million people in 2036.

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Another spreadsheet providing important information is the chart which shows the density of population in the UK in 2001 compared to 2011 which was published in 2012. It shows that London and its surrounding areas were always a little bit more populated than other parts of the UK which is also a reason why London is the most expensive place when it comes to house prices. But it also shows that the density of people kept growing since 2001.

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So with a growing total population in the UK especially in London, it is inevitable that the house prices are rising the way they do.

Growing Population only reason for rising prices ?

Looking at another dataset from CML (Council of Mortgage Lenders) from 2014 reveals another truth. This dataset starting in 2005 shows that gross mortgage lending to mortgage takers grew significantly till 2007. But in 2008 when the financial crisis came up, the figures suddenly dropped. In 2008 they dropped by about £1oo million pounds  and in 2009 they dropped by about £220 million pounds compared to 2007.

So it is obvious that the rising house prices problem is artificially created by banks and loan givers. In the past loans and mortgages were given to a large number of people. Since so many people could take out a loan for a house, prices of houses rose significantly.

The Rich boost real estate prices in London

London has got the largest number of billionaires in the world. Recently more super rich people came to London. These people buy super luxury flats and houses in London by simply paying much more money than originally charged. This is another reason for rising house prices and a very special one for exceptionally high prices in London.

Real Estate Bubble in UK ?

So a real estate bubble might be coming up in the UK with house prices rising like that. By once again looking at the gross mortgage lending figures from CML it can be seen that volume of loans have fallen after the financial crisis of 2008 with real estates bubbles bursting all over the globe. However that number started growing again in 2011 and kept that way till today.

Sources: ONS UK Statistics about Population Projections of UK from November 2013 (Spreadsheet starting in 2012 – 2036) https://docs.google.com/spreadsheet/ccc?key=0AoBYy67QwoevdF9hT3ZBR3NibFlHa1owSE5mYldwdUE&usp=sharing#gid=0

ONS UK about UK Population Density and change 2001 and 2011 http://www.ons.gov.uk/ons/dcp171778_304116.pdf

CML (Council of Mortgage Lenders) Chart about gross mortgage lendings from 2005 – 2013 http://www.cml.org.uk/cml/media/press/3883

Statista.com statistics about UK Population from 2003 – 2013 http://de.statista.com/statistik/daten/studie/19319/umfrage/gesamtbevoelkerung-in-grossbritannien/

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  • dandavies23

    Hmmm is this disqus or what?

    • Armaan Sengul

      Seriously what are those weird comments up there ? 😀