The housing market is elastic, meaning UK house prices can fluctuate depending on a wide range of factors.
Whether you’re a homeowner who wants to sell their house or you’re looking to buy a dream home or investment property, it’s useful to be aware of some of the things that can affect house prices.
Even if you’re a homeowner who’s not currently planning on selling, it’s natural to be curious about how much your house could be worth.
In this article, we’ll explain some of the factors that can either increase or decrease the value of your house. Some you may be able to change, while others are down to influences outside of your control.
What factors affect house prices?
Some of the things that can affect how much your house is worth are its location, size, age and condition, any home improvements you’ve made and what your neighbours and their houses are like.
The value of your property is also influenced by the state of the economy, interest rates and shifts in demographics.
Read on to look at all of these factors in more detail.
1. Location
You don’t have to be a rocket scientist to know that a house on London’s King’s Road is going to be worth considerably more than a property that’s close to a rubbish tip or located on a flood plain.
But you might be interested to know that if a premium supermarket like Waitrose or Marks & Spencer opens near your house, the value of your property could go up. In fact, any amenities like shops and leisure facilities that are built nearby can increase your house’s value. As can having good transport links.
The quality of local schools also has a huge impact on your property’s worth, with people willing to pay more for a house that has a good school nearby.
In contrast, living in an area with an increased crime rate can substantially devalue your house.
2. Size
Generally speaking, the bigger the house the more it will be worth. But this depends on its age, condition and location.
And while you may own a large house, its usable space will be taken into consideration when determining its value. Take note that attics, garages and unfurnished basements won’t usually be counted as usable space.
It’s not just the size of the house itself but also the size of the space outside, like its garden area. A bigger garden will increase the value of a property compared to one with a small garden. As a general rule of thumb, the more space a property has, the more expensive it will be.
3. Age
While it’s impossible to change the age of the actual building, newer plumbing and wiring can add value, and if the roof and appliances like the boiler are still under warranty, your house will be more desirable to a buyer.
Older buildings tend to be subject to tales of hauntings and other ghostly goings-on, which can put people off buying a property. So it’s best not to mention any of these to potential buyers. Houses with unpleasant histories like murder – or even divorce – can also be less attractive to buyers.
4. Condition
One way to ensure you get the best price for your house is to present it in the best light possible. This means decorating it to a high standard throughout, tidying up, cleaning windows, mowing the lawn and making any cosmetic repairs, like touching up chipped paintwork and washing stained upholstery.
It’s wise to get things like damp and structural damage to the building seen to by a professional, as these can greatly reduce your property’s worth.
5. Home improvements
There are a variety of improvements that could increase or decrease the value of a property. An example is if you have planning permission to build an extension or annexe to your home or if you have a cellar or basement when nobody in your local area does. These features will cause a home to be worth more than its neighbouring properties.
On the flip side, if a house has a single garage, but the nearby properties all have double garages, this could significantly lower the property’s value.
Niche improvements, like stone cladding or period features, and over-improving that ends up ruining the proportions of the building can also be detrimental to your house’s worth.
6. Neighbours
For an indication of what your house might be worth, just take a look at your neighbours.
If a house of a similar age and size has been sold in your area recently, you’ll have a good idea of what you can expect to get for yours.
The type of neighbours you have can also impact your house’s worth. If, for example, they’re mainly young families, you may have trouble selling your one-bedroom flat at a high price. Additionally, having nuisance neighbours can reduce the value of your home.
7. The economy
The state of the economy is a key factor that affects the property market and house prices.
How healthy the economy is, is determined by economic indicators, like manufacturing activity, the price of goods and employment data.
More people being employed on high incomes means there’s an increase in demand, which pushes up prices. On the flip side, a rise in unemployment leads to a decrease in demand, meaning a decline in the housing market and lower property prices.
8. Interest rates
Changes in interest rates can have a huge impact on someone who’s looking to buy a house.
When interest rates are high, the cost of mortgage repayments increases. In this scenario, fewer people will be able to afford the repayments, meaning there’s a lower demand for buying houses and their value will therefore decrease.
And if interest rates are too high – like they were on Black Wednesday – homeowners who are unable to afford their mortgage repayments will have to sell their properties, which increases supply and pushes house prices down.
It’s worth noting that most UK homeowners have variable mortgages, which means they can either benefit or suffer, depending on the varying interest rates. Those who have fixed-rate mortgages will be protected from fluctuating interest rates for two to ten years.
9. Demographics
Demographics such as age, income, migration patterns and population growth can have a huge impact on how houses are priced and the types of properties that are in demand.
Major shifts in demographics can influence the housing market for years. For example, baby boomers born between 1945 and 1964 are now starting to retire, meaning there could be an increase in demand for second homes in holiday hotspots, or an increase in supply when they decide to sell-up and downsize because their children have left home.
In contrast, the rise in the average age of first-time buyers coupled with low affordability means more people are choosing to rent rather than buy property. With fewer buyers, house prices decrease and the property market suffers.
But an increase in population, due to migration and more births, means more of a demand for housing and so property prices increase.
Summary
Whether you’re a home-owner who wants to sell their house, you’re looking to buy a dream home or investment property, or you’re just curious about what your property is worth, you may be wondering what some of the factors are that could affect your home’s value.
There are many things that can affect how much your house is worth, including its location, size, age and condition, any home improvements you’ve made and what your neighbours and their houses are like.
The value of your property is also influenced by factors completely outside of your control, such as the state of the economy, interest rates and shifts in demographics.
