(And Why Sometimes They Don’t)
Overview
Why do house prices rise?
In the UK, the belief that “house prices only ever go up” sits somewhere between common wisdom and national folklore. Ask someone why, and you’ll usually get a vague “supply and demand” before the subject changes.
In this blog we’ll delve into some of the many contributing factors to what actually shapes a market in the long term.
Here are the five that matter.
1. Cheaper borrowing pushes prices higher
(The factor most people overlook)
Mortgage rates are the quiet engine behind the housing market.
When borrowing becomes cheaper, buyers can afford more. At low interest rates, the monthly payment on a £500,000 home can feel similar to the payment on a £350,000 home at higher rates. Cheaper money creates higher bidding power, and prices follow.
The reverse is also true. Which is why the last three years have been so unusual. Rates jumped sharply, yet prices barely moved. They should have fallen. But the next four forces worked hard to keep the market supported.
2. Demand keeps outpacing supply
(and the system is engineered to stay that way)
Since 2022, the UK population has grown by around 1.7 million people, roughly the size of two major cities combined. Every one of those people needs a place to live.
Meanwhile, the planning system continues to under-deliver. We do not build enough homes, and haven’t done for decades. Structural undersupply creates permanent upward pressure on both rents and house prices.
3. Confidence turns caution into urgency
Demand isn’t just the number of people. It’s wages, security, and belief.
When jobs feel stable, wages rise, and the cultural script says prices always go up, buyers stretch. They compete. They pay asking price or more because delaying feels more expensive than acting now.
But when confidence cracks, job losses, political volatility, a sudden belief that prices might fall, the market slows almost instantly.
4. Productivity makes land more valuable
When an area becomes more productive, better transport links, new employers, regeneration projects, thriving industries, the land beneath becomes more valuable.
Homeowners capture that uplift.
A great example is Manchester in the last decade. Classic examples of productivity driving price growth.
Where productivity stalls, price growth does too.
For homeowners in newcastle we can be excited about the fact there is real, visible regeneration finally hitting the ground after years of talk, from the Quayside and Forth Yards cranes to new Grade-A offices and thousands of incoming higher-paid jobs – all feeding directly into rising demand and, most importantly, genuine long-term capital growth in a city that has been undervalued for far too long.
5. Inflation: the quiet, relentless tailwind
Inflation raises the cost of almost everything, including property.
With a fixed-rate mortgage, inflation benefits the homeowner: the debt stays the same while wages, rents and property values rise. Even modest inflation compounds powerfully over time. At 3% per year, prices roughly double in around 24 years.
The Bottom Line
These five forces constantly push and pull, sometimes together, sometimes against each other. That’s why short-term forecasting is unreliable.
But over decades, the pattern is clear. Limited land. Chronic undersupply. Inflation. Productivity growth in the strongest locations. Together, they create an upward trend that has shaped the housing market for generations.
Not in a straight line. Not without turbulence. But directionally, unmistakably, upward and that’s why house prices rise.
Wondering how much your home is worth?
