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Throughout the past year, house prices have gone from strength to strength, continually increasing and creating a seller’s market for homes as demand has continually increased.
According to the latest House Price Index, the average price of a home is over a third of a million pounds (£333,564).
These increased prices have led to speculation about whether the UK is currently in a housing bubble.
An asset bubble, according to Investopedia, is where the market value of an asset (in this case property) rapidly increases beyond the intrinsic value of the asset itself (the land and the building).
Probably the most famous example of a bubble of this sort happened in the late 1990s with the dot-com boom, where many internet-based businesses were worth many orders of magnitude more than their intrinsic value.
The stamp duty holiday, lower mortgage rates and the mortgage guarantee scheme have helped to keep prices high and demand strong over the past year, as well as more people deciding to move away from their commute and find their dream home.
Whether the UK’s housing market is in a bubble may only be known in hindsight if there is a significant fall in house prices. If the current demand continues, however, this is unlikely to happen for some time, once buyers have a chance to enter the market.
