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d) Strict control of the green belt restricts the amount of property developments throughout the UK. The construction of new homes has been vastly reduced, pushing up prices of existing property. The government prefers to encourage the regeneration of our inner cities, unfortunately we are slowly running out of land to build on.
e) Mortgage lenders are increasing the amount of personal borrowing and extending the time to repay the loan, falling in line with the increased house prices. This situation increases the confidence in the housing market as the leading institutions are prepared to take on more risk.
Why do house prices fall in the short term?There will always be times when even with a housing shortage, prices can fall. Here are some reasons to explain why.
a) When there is a threat of interest rate rises on the horizon, buyers can hold off buying until the interest rates have been reduced. This will reduce the number of sales and some will be forced to reduce the house price accordingly.
b) A rise in prices for utility services can influence the house prices as buyers on tight budgets will postpone purchases for more favourable times.