Published: 20 December 2024
Reading time: Two minutes
Mortgage approvals are at the pre-pandemic average, but will that demand lead to an increase in house prices? Our UK Chief Economist gives his analysis.
There are four key things which drive house prices – what we call the wealth effect, supply and demand, affordability, and investment yield.
How wealthy a society is clearly matters to the general level of house prices, although this does tend to be one of those longer term backdrop issues. What is clear is that as people grow wealthier, they are inclined to put ever more of this additional wealth into nicer housing. As to supply and demand, the UK’s population is similar to that of France, yet they have 37 million homes against the UK’s 30 million. This government has made it a priority to see this problem fixed, but then so did the last government.