The top 16 reasons property prices in the UK change and how they’re determined

Are you hoping to understand the UK property market but getting overwhelmed? You’ve come to the right place.

Property prices change constantly, and it can be quite hard to keep up. However, once you get a hang of the basics, you’ll quickly understand how the market operates.

This in-depth guide will highlight the basic influences on property prices to help you understand the market, types of properties, and the history of housing.

By the end of this guide, you’ll feel prepared to look for the best properties, negotiate deals, and maintain or increase the value of your property.

UK Property Prices Fluctuations and Determinants: Location, Demand, Size, Amenities, Schools, Historical Trends, and More

1. Location

Real estate agents love using the word “location” when selling a house. Location determines lifestyle, which is a major factor for most buyers.

But what defines a good or bad location?

Numerous factors impact a location’s reputation. Each buyer has their own needs, but there are a few consistent priorities for most buyers:

  • Safety: People want to feel safe with their families and their possessions. Safer neighbourhoods cost around 38% more than high-crime neighbourhoods in the UK. 
  • Community: For family buyers, a good community to raise the kids in remains a top priority. Strong communities provide social events and support, which fosters a nice and friendly living environment.
  • Infrastructure: Being near work or your hobbies saves time and money. Buyers will pay more to avoid long commutes in their daily lives.

People want to feel safe, happy, and supported in the location they choose, and a good location ensures a good lifestyle.

2. Market Demand

More buyers equate to higher market demand. At any given time, demand will vary and impact the cost of properties.

It can be thought of like this:

  • As demand goes up, prices go up. With more people wanting to buy, they’re willing to pay greater amounts to beat out the competition.
  • If demand goes down, prices go down. With fewer buyers around, sellers are forced to make the deal sweeter by lowering their prices.
  • The supply doesn’t always keep up. Drastic increases in demand can result in drastic price increases if the supply is low in a certain area.

Demand increases competition. As a property owner, you’ll want to ensure your property is in demand if you decide to sell to maximize your profits.

3. Property Size

The size of the property will greatly impact the cost. Whether it’s commercial or residential, you pay for more space and land.

There are a few implications to think about for property size:

  • Potential: Sizely land offers more potential to build on. For buyers thinking about additional rooms, houses, or even commercial growth, they will want a larger property size.
  • Investment value: Large property is an investment. Property owners trust historic patterns of land value increasing, so they hold their wealth in property. The bigger the property, the greater the investment.
  • Market trends: There are times when smaller homes may be more desirable. This year, more people in the UK are seeking smaller homes as an affordable option from the housing crisis. This will in turn increase the demand and cost of smaller homes.  

While short-term market trends can drive up the price of smaller homes, larger properties consistently cost more if all other variables are controlled for. The larger properties provide greater flexibility and potential for monetary growth.

4. Property Condition

Well-maintained properties are significantly more valuable than properties in poor condition. Most buyers want to trust they’re getting exactly what they’re paying for, which a quality property ensures.

  • Buyer needs: Many buyers don’t have the time, money, or energy to fix a poorly maintained property.
  • Low level of trust: A property that looks poorly maintained gives buyers fear of other unknown issues. If the previous owner didn’t look after the noticeable problems, buyers may fear other issues coming up later.
  • Note to property owners: Keeping your property in good condition means yearly upkeep and investment in your property. Small problems can become big problems when not acknowledged and you never know when a new one will arise.

5. Local Amenities

The offerings and amenities around an area will affect the price of a property, as people want to be close to their daily or weekly activities.

Being close to places they frequent saves time, money, and energy, making it a worthwhile investment. Property prices are higher in busier, high-trafficked areas

Local amenities that will drive prices up are:

  • Access to public transportation
  • Schools
  • Gyms
  • Green spaces and parks
  • Water access (ocean or lakes)
  • Healthcare facilities
  • Shopping and entertainment
  • Employment centres

For commercial properties, being near other businesses will drive up the price. Offices in prime locations, considered “Class A”, are the least affected by market trends and variations.

This is seen in 2023 as employers are appealing to get more people back in the office by offering amenities.

Local amenities equate to convenience, and people pay for convenience.

6. Local Schools

For buyers looking for family homes, the quality of the local schools is highly influential. Families, or future families, desire a quality education for their kids and will pay more to be in the right school district.

  • People pay more: A 2017 study found that houses around the best 10% of primary schools were 8% pricier than other properties.
  • Homes near schools sell quicker: Having a great school close by seals the deal for many families. People look out for properties like this and they sell quicker.
  • Convenience for parents. Living near a school can take away the hassle, time, and gas of dropping kids off for five days a week.

People with kids or looking to have kids often list the local schools at the top of their priority list. This drives the demand for these properties, increasing the prices. 

7. Local Infrastructure

Local infrastructure is the structure in place from the local city or government that supports a community or area. This allows people to go about their days safely and with less hassle.

With quality infrastructure, livability increases, and property prices do too.

Some examples of local features that impact prices are:

  • Roads
  • Utilities (water, waste management, electricity)
  • Telecommunications
  • Public services (police and fire department)

Buying property in locations with strong infrastructure is a worthwhile investment. Confidence that all your daily needs will be met is highly desirable for buyers. 

8. Property Features

Specific features of properties drive up the prices of homes. While preference does come into play, some features objectively increase the value of homes because of how many people consider them “musts”.

Redfin found the top 10 value-adds for homes to be:

  • Stainless steel appliances
  • Natural gas utilities
  • Backyard
  • Basement
  • Vinyl siding
  • Foyer
  • Gas cooktop
  • Laundry area
  • Washer
  • Granite countertops

Many buyers will rule out any home that doesn’t have their desired features. This increases the demand, and therefore the value, of properties that have those features.

9. Supply and Demand Dynamics

Demand increases prices, but the supply is equally as important. The relationships between supply and demand make up the basic principles of any economy.

Think of the relationship like this:

  • High demand + high supply = even power for buyers and sellers.
  • High demand + low supply = seller power.
  • Low demand + high supply = buyer power.
  • Low demand + low supply = even power for buyers and sellers.

Increased demand gives sellers power, while increased supply gives buyers power. 

2023 sellers are experiencing low market demand, which has forced an average discount of £14,100 for them to successfully sell. The buyers are in power, in this case.

10. Economic Factors

The state of the economy, as well as predictions for the future, will change housing prices. This has a direct relationship with demand, as economic factors increase or decrease buyer interest.

Some economic factors to keep in mind are:

  • Interest rates. When it costs more money to borrow money from the banks, people are less likely to take out a loan and purchase a home. This will lower the prices.
  • Job market and income levels. When people are employed with higher wages, they can invest in property. With low wages, high cost of living, and high unemployment, like the UK is currently seeing, the demand is lower because fewer people can afford to buy.
  • Economic growth. If the economy is forecasted to grow by economists, people trust the investment into property. Accordingly, this increases demand and prices.

Economic factors impact people’s confidence and ability to get loans for homes. A stronger economy will increase demand and property prices, while a weaker economy will see lower housing prices from sellers.

11. Potential for Improvement

Getting into the housing market sometimes takes sacrifice. The perfect home isn’t always the perfect price. Knowing the best aspects to sacrifice with the intent to improve helps buyers pick the right home.

  • Location and infrastructure: Some cities and towns prioritize fixing up the infrastructure and supporting more businesses, giving hope that it will be a stronger and better location in the future. Looking into a city's plan for the future can help determine if there is potential for improvement.
  • Fix-ups: If you have time, money, or experience with properties, grabbing a fixer-upper home and putting some work into it can be extremely rewarding. It’s important to be realistic and truly understand your position before signing up to do this.
  • Suburbs: As cities grow, suburbs become more sought after as prime territory. Getting in on a neighborhood early as a city is growing can be a great strategy.

Properties don’t need to be perfect to be a good investment. Looking toward the potential in the future of the land and home can be lucrative.

12. Flooding Risk

Flooding is a major concern in the UK, as one in six homes are at risk.

With that risk expected to significantly increase, buyers look for confidence that they’re safe from flooding before buying a home.

Buyers are willing to pay more for flood safety because the consequences can be life-changing. Think about what it means to buy a flood-risk home.

  • Insurance costs: For homes that are at risk, getting insurance is worthwhile, but a hefty yearly expense that is avoidable with the right purchase.
  • Repair costs: The loss of property and damage to a house that flooding causes is not worth the concern to many buyers.
  • Stress: Worrying every time a heavy storm hits isn’t good for anyone. People will pay to avoid this.

A future of heavy rain is predicted, and a flood-proof house will keep you and your possessions safe, as well as help to maintain or even increase the value of the property.

13. Parking Arrangements

Poor parking can be a real pain and non-negotiable for many buyers. Anyone that has lived in a city without private parking is familiar with the hours wasted looking for parking. A driveway or accessible private parking increases property values.

Convenience is money, and people will pay to save time and energy, especially when it comes to parking. Keep in mind this varies from city to city, with few towns seeing similar numbers to those mentioned above.

14. Interest Rates

An interest rate is the cost of getting a loan from the bank. As interest rates increase, people are less likely to buy a home because it will cost them more.

Lower interest rates encourage:

  • More purchasing power
  • Lower mortgages
  • Increased demand in the market

While low-interest rates increase the demand, they don’t always increase the supply. This can drive up competition and housing prices as a result.

15. Government Policies and Regulations

Local governments have unique policies for property owners that vary from neighborhood to neighborhood. It’s important to know the policies because they can impact the profitability of the property, and therefore, lower the price of it.

Some local government policies to learn about are:

  • Zoning Regulations
  • Housing Development Regulations
  • Rent Control and Rent Stabilization
  • Affordable Housing Programs
  • Tax Policies

Policies like these are in place to help renters, but they do have consequences for the owners of the buildings. Research and take into consideration what local policies are in effect.

16. Demographic Changes and Population Growth

Demographics shift as neighborhoods grow and shrink. People look for certain demographic makeup when buying. Families typically want to be around other families while young adults will want to be around other young adults.

Demographic changes will shift the value of properties when they change over time, as indicated below:

  • Declining population: A shrinking population is associated with lower housing costs and decreased desirability.
  • Older population: On average, neighborhoods with older populations tend to see decreased property prices.
  • Population growth: Towns going through a growth stage see increased demand for property, and the prices follow.

Why Do Property Prices Rise?

Property prices rise as demand increases. If more people are in competition to buy a property, the price will increase.

Of course, many factors can increase demand, such as:

  • Strong economic forecasts or conditions  
  • Location, community, and infrastructure improvements
  • Government policy change

If you’re looking to hold the value of your property, you need to ensure people will want it.

Why Do Property Prices Fall?

Property prices fall as demand decreases. If no one wants to buy a property, the seller needs to decrease the price to make it more appealing.

And as with increased demand, some main factors that cause the fall in demand are:

  • Poor economic forecasts or conditions
  • Adverse weather events (storms, flooding, hurricanes)
  • Declining infrastructure or population

How Can You Negotiate a Good Deal on Property Prices?

If you're looking for strategies to secure a good deal on a property, you must be knowledgeable on how to approach it; it may save you thousands of pounds!

Some of the best strategies to keep in mind are:

  • Research the market
  • Set a budget
  • Be reasonable
  • Be respectful
  • Be willing to walk away

It may seem simple, but it’s important to feel confident when you approach the sellers. 

Can You Negotiate The Price of a Property?

Yes, most sellers will be open to negotiation, especially if they’re not getting many offers.

Before negotiating, you should prepare with extensive knowledge of the area, the history of the property, and current market conditions. The sellers want to be respected and will not want to work with someone that lowballs them.

It’s important to know when to walk away. Sometimes, it just doesn't work out and the sellers don’t want to work with what you have. That’s okay, stay respectful, and allow them to continue their process of selling. More homes will pop up.

Can You Wait for The Perfect Moment To Buy Property?

No, finding the perfect moment will only hold you back from committing.

It’s a big commitment that may never feel perfect. If you find a property or home that you love and can afford, you should buy it.

The market is rarely perfect and you may miss out on the right place for you by waiting for everything to align.

Can You Research Previously Sold Property Prices?

Yes, in some places. In both England and Wales, you can use the government website to see the selling history of the property.

It might also help to look at the property trends in certain regions on the government website, as well.

What Is the Historical Trend of Property Prices?

Looking back at history can illuminate the future. Housing trends can be traced back to over 175 years ago, with noticeable patterns that may be drawn on today for predictions.

The housing market goes through ups and downs but generally tends to trend in one direction for half a century or more. The last century has shown a consistent upward trend.

Currently, house prices relative to average income are higher than they’ve been since the late 19th century.

Back then, housing prices went on a downward trend for half a century shortly after. This is something that should be taken into consideration, although the historical context is different now and this pattern can’t be relied on.

 

What Exactly Are Property Crashes?

Property crashes are sudden declines in property prices. They happen in a certain region or the entire real estate market.

The variables that can cause this sudden downturn in the housing market are:

  • Speculative Bubbles
  • Overvaluation
  • Economic Downturns
  • Tightened Credit
  • Oversupply
  • Speculative Overbuilding
  • Government Policies
  • Demographic Shifts
  • Natural Disasters
  • Global Economic Factors

History of Commercial Property

Commercial property is property that’s used for business or commercial reasons, such as office spaces, apartments, or industrial warehouses.

For the last century, commercial property demand increased as the economy boomed. In recent years, however, there has been a decline in office space usage as more people work remotely. Industrial property remains on an upward trend.

History of Residential Property

Residential properties are essentially homes used as living spaces.

Historically, prices of properties increased consistently in the last century until the 2008 financial crash.

There are currently concerns over the affordability and accessibility of residential housing.

Does the Kind of Property You Purchase Influence the Price?

Yes, the type of property will influence the price. Commercial properties are, on average, much more expensive than residential properties. If you’re looking to buy for the sake of investing, you should seriously consider what each requires.

Commercial Property Prices

There are five main categories of commercial properties and they vary greatly in their upfront costs.

  • General industrial
  • Hotels and residential institutions
  • Commercial, business, and service uses
  • Educational and local community
  • Other properties

The prices of properties will depend on the factors in the list earlier in this article.

Residential Property Prices

Residential properties range from small homes to multiple-unit homes.

It’s much easier to purchase these types of properties, as the upfront cost is significantly less than commercial property.

Some examples of residential properties and their average prices are:

  • Single-family homes: £495,804
  • Condominiums (condos): £270,991
  • Apartments: £254,485

Other residential properties are:

  • Mobile homes
  • Retirement homes
  • Tiny houses
  • Mansions
  • Cottages
  • Villas

Is Property a Wise Investment?

Yes. Property consistently proves to be a great long-term investment. The dips in the value of a property are typically short-lasting, so it’s a great long-term investment.

You can feel safer having a reliable place to store your wealth. You must ensure you feel ready to offer the time and energy required to maintain the property, though.

Should You Purchase or Rent Property?

Renting and purchasing are both great, so what’s best for you depends on your circumstances.

If you’re in a position to purchase a home for yourself, your “rent money” can be used to gain an asset that holds its value, rather than go into your landlord’s hands.

Renting is a great option for people that can’t afford a home in the place where they want to live. It offers increased flexibility and decreased responsibility, which can be great for some people.

Conclusion

If you’re looking to buy, maintain, or add to the value of a property, you must be knowledgeable on market factors.

For buyers, you need to educate yourself on the market and properties you’re interested in. An informed buyer will have much more luck finding and negotiating a property.

If you’re hoping to maintain or add value to your property, you do have control over it. Ensure you’re keeping up with the maintenance of your home and thinking about the future.

One of the best ways to increase the value of your property is to waterproof your home. With the weather getting increasingly wet over the past few decades, you will want to be confident about your property and possessions.

Get in touch with us to discuss how our certified property care and preservation company can help you with that.

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