Why is the UK housing market crashing?

The UK housing market is in a state of flux, but what’s causing it? In this post, we’ll explore three possible reasons for falling prices: consumer confidence, interest rates, and new house builds.

Lack of affordability

The issue is that house prices are too high. There’s a shortage of supply, which means that the number of homes for sale has fallen and demand has risen. This is partly because many people can’t afford houses these days because their wages haven’t kept up with inflation, but it’s also because there are fewer properties being built into the market.

The problem with this explanation is that it doesn’t account for why house prices have gone up in the first place: they’ve been driven by investors who want to cash in on rising property values and have no intention of living in them themselves! In other words: they’re using them as investment vehicles rather than homes (even though we know how much impact this can have on local communities).

Consumer confidence

Consumer confidence is a measure of how consumers feel about their personal finances. It’s important to note that consumer confidence is not the same thing as consumer spending, but it can be used in conjunction with other indicators to determine whether or not consumers are feeling confident enough to spend money on housing.

Consumer confidence is often considered an important indicator of economic activity because it indicates how consumers’ views on their own financial situations may be affecting their willingness to buy homes or make other types of investments (such as stocks). As you might imagine, if people have high levels of optimism about their personal finances, then they’ll probably feel more confident about buying homes—and this could lead them to make purchases that benefit both themselves and society at large (e.g., homeownership).

Interest rates

The most important factor in determining house prices is interest rates. Interest rates are the cost of borrowing money and they affect how much you can afford to borrow, as well as how much lenders charge for mortgages.

In recent years, the Bank of England has had to keep these low because they were at historic lows after the financial crisis of 2008-09. This has meant that people could borrow more cheaply than ever before and therefore buy houses without having to pay too much for them – so we’ve seen an increase in house prices over time as a result!

However, it’s expected that interest rates will rise again in 2022 (and beyond). This could make buying properties more expensive than before—which would mean those who already own homes may be forced out of the market due to affordability issues caused by higher monthly repayments.

New house builds

The issue is not just a UK problem but across Europe as well.

In fact, the number of new houses being built has been falling for several years now and is only around half what it was in 2007.

Brexit uncertainty

The housing market is linked to Brexit.

The pound has been weak since the referendum, which means that UK-based businesses are seeing their profits shrink as a result of currency fluctuations and higher costs for imports. This has prompted some to leave their homes in search of cheaper property abroad—or even stay put but cut back on spending on other things like holidays or cars. As a result, house sales have slowed down significantly since last year; meanwhile, prices have fallen by around 20% nationally since 2016 (and over 50% in London).

The housing market is falling and we don’t know why.

The housing market is falling and we don’t know why.

What are the causes of this fall in house prices?

Why are house prices falling?

What can be done to prevent them from continuing to fall further?

Conclusion

The housing market is a complex issue, but it’s clear that there are some signs of weakness which could affect prices. One thing is for sure though: it’s not just about Brexit. The problems we’ve outlined above are likely to continue until something changes in the broader economy or consumer confidence picks up again as we move towards another election in 2020.

In the meantime, we should expect further falls in house prices as first-time buyers struggle with affordability issues and interest rates remain low while new builds stay thin on supply.