House prices have been on the rise for the last five months after a disastrous year of falls. The average price of a house in the UK in September stands at £161,816. This figure is £19 higher than this time last year. If we go back to February this year the average house price had slumped to £147,746.
So why do some economists think that these rises, which have been seen in all areas of the UK, are about to come to an end?
Firstly at the end of this year the reduction in the stamp duty threshold will end so that property sales over £150,000 will pay 1% stamp duty to the government.
Secondly the likelihood that unemployment will still rise even if we exit the recession is high. If people are worried that they might lose their job they are less likely to buy a new house.
Finally the restrictive credit conditions continue to affect the market for houses. The credit crunch has led to banks tightening their lending criteria making it much harder for potential home buyers especially first time buyers.
This article explains further.
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