We hear a lot about house prices and the pros and cons of a strong housing market. There’s been a huge increase in the value of property throughout the UK in recent years, but how will this help you in the future?
The truth is, there will always be winners and losers in this scenario, but even if you’re not on the property ladder yet, rising house prices could lead to some hidden benefits that might just help you out.
Homeowners can Release Equity
One group in particular that benefits from rising house prices are homeowners. Whether they own their house outright, or they have a mortgage, rising house prices increase their wealth.
This gives people the flexibility to release equity from their home by remortgaging. Similarly, older people often downsize to release cash from their house. By this point, many people have paid off their mortgage so they own their own home, and the money they realise from the sale of their house can help fund their retirement.
Taxes from House Sales Help Balance the Books
Taxes from house sales provide a big boost to government finances and the higher house prices are, the more money is going to be raised through taxes. Everyone benefits when the national finances are doing well, and these taxes contribute to us balancing our books.
We don’t all love paying taxes, but it’s a part of life, so at least when house prices go up, we’re making a good contribution towards helping the national finances. Property taxes represented 9% of UK income in 2017-18, so it’s not an insignificant amount.
Expansion of New Housing Projects
The obvious problem with high house prices is that it makes it extremely difficult for people to get on the property ladder. Today the average UK house price is over £200,000 and according to CashLady, this is only set to rise in the coming years.
This means that first time buyers are having to save up huge amounts for deposits and it’s much harder to get on the property ladder. However, this will spur action, and as house prices rise, there will be even louder calls for more affordable new housing to be built.
It might be silver lining thinking for first-time buyers, but rising house prices could mean more affordable options in the future.
Government Help to Buy Schemes
Governments recognise the need for people to be able to get on the property ladder, but they’re aware that the more house prices rise the more difficult this is. To help combat this, help to buy schemes that are designed to make it easier for first-time buyers to get on the property ladder are becoming more common.
Minimum deposit rates could be lowered, and other mechanisms created to give people a realistic opportunity to buy a house. It might have come after years of frustrations for first time buyers, but at least rising house prices will encourage governments to provide more help.