The housing market in the UK is consistently seeing change, and has of late been on the rise. More specifically, throughout the December to January period, the average asking price for UK properties rose significantly, indeed it’s probably one of the biggest jumps on the property market in recent times.

Although this may seem like a boon for existing homeowners and property owners looking to sell, this may bode ill for first-time buyers. In addition, this rise contributes to the risk of a housing bubble.

Unusual rise in house prices over Christmas
According to the latest figures released by estate agency specialists, Rightmove, the properties coming onto the market rose 1% between December 9th 2013 and January 11th 2014. This is starkly contrasted to the typical fall of around 0.2% during the same period over the last 10 years.

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UK property prices have jumped recently.
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Over the whole of the last 12 months, the annual price growth in the housing market was 6.3%. This is a very significant rise; in fact it’s the highest documented since November 2007. The property market therefore is most definitely on the up, and although this is aligned with a rise in the rate of the cost of living, property prices have risen more than three times the rate of inflation.

Double-edged sword
The rise in the market may be attributed to the success of Britain’s growth, particularly when taking into account falling unemployment rates, record low interest rates and government mortgage schemes. In comparison to many other major industrialised economies in recent months, Britain’s growth, in the housing market in particular, is significant.


Yet this speedy recovery of the market may be a little too quick. In response to the recent growth, the Bank of England announced that it would be scrapping incentives for mortgage lending under its Funding for Lending Scheme. However, the sector still remains supported by the Help to Buy mortgage guarantee programme set up by the government.

This rise in the market reflects a greater demand for housing. Rightmove have identified early signs of a more abundant supply of existing homes coming onto the market in 2014 to meet this, yet also suggested that more construction projects in both the private and social sectors will be necessary to help deal with the expected levels of demand.

Uncertain future
As mentioned before, it can be considered a great thing that the housing market is prospering and growing so much recently, it acts in favour of existing homeowners and is a boon to the UK economy. However, it also acts as a barrier to potential first-time buyers, but more significantly there is a very real risk of creating a housing bubble.

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Getting the keys to your house is always a special moment.
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A housing bubble is a phenomenon in which house prices rise to the extent that they peak and plateau too soon. This is shortly followed by a dramatic drop in prices and can really damage the industry as a whole, leaving any home-owners caught in negative equity. A sharp rise in prices and quick growth is one of the primary contributors to this risk and perhaps the increase seen between December and January is merely a forewarning of a crisis in future. So enjoy the success while it lasts, because gained too quickly, it can lead to downfall.

Image credits: Roger4336 and Stevendepolo