Have UK Property Prices Reached the Bottom?

and are they on the way up again?

Thinking about gettting on the UK property ladder?  Before you take the plunge, let us look at what has happened to the Property market since 1983 when Halifax started tracking UK House Prices.

 

house-prices

So from 1983 – end of 2012, house prices have risen by 422% (london 574%). If you had invested in property in 1983, you would have averaged a 14.5% per annum return on your money over that period. Not bad you might think.

However sadly these figures have not been adjusted for inflation. Inflation has risen by 186% since 1983 and so in real terms house prices have risen by 236% (london 388%) Still a not bad 8.13% return per annum. That compares to the FT All Share index average of 7.28% per annum.

Both of these investment vehicles seem to be on a par with each other, although investments in shares do carry the bonus of an annual dividend and this hasn’t been taken into account. Also there are costs associated with owning a property such as maintenance, although there is no rent to pay.

So lets look at what has happened to house prices in the last few years.

Like other investment vehicles house prices have had their peaks and troughs. At the beginning of 2008 the average UK House Price reached a high of £196,478 by the end of 2012 house prices had fallen to £161,308 a drop of 18%

The latest set of figures in June 2103 the average house price was £162,621 which was an increase of 0.6% over May 2013 and an annual increase of 0.8%.

I don’t think this drop was as much as people thought it would be, although the country is still in alot of trouble. It may be that because interest rates are so low this has prematurely stopped the drop in house prices, however the house price to earnings ratio is still very high and this is something that I will look at in a future post

The big question is:   Have house prices reached their lowest point and are they on the rise again?  I think the next twelve months will help answer this question and it may be as interests rates rise in the future, house prices continue to drop

 

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