What Drives UK house Prices up?

Property prices will continue to go up in the long run. The main two reasons for this can be found below.

Inflation

Houses are of limited supply. Unfortunately they cannot be built at the drop of a hat and where they are built is dependent on the available land. As a result, when additional money is created by the Bank of England, the price of houses will inevitably rise over time. See my previous blog post on the Basics of Inflation to learn more.

Rate at which new houses are built isn't sufficient to match demand

In the UK the rate at which new homes are built has historically not kept up with the rising demand. This has led to a housing shortage which inevitably pushes up house prices.

Source: House of Commons Library

Demand for housing is primarily driven by population growth. Since the 1990s, the population of the UK has grown on average by more than 300,000 people each year, with the main driver being due to net migration and people living longer.