Every 1% increase in population leads to a 2% increase in house prices

Report here from the UK Ministry of Housing, Communities and Local Government

Analysis of the determinants of house price changes

 If the number of households increases by 1 per cent, house prices would increase by about 2 per cent;
 A 1 per cent rise in real incomes would increase house prices by 2 per cent;
 If interest rates increase by one percentage point then house prices would fall by around 3per cent; and,
 If housing stock increases by 1 per cent, house prices would fall by around 2 per cent.

Household growth
In 1991, the population of England was 47.1 million
In 2016, the population of England was 54.5 million
This is equivalent to an increase of 16 per cent over this period (1991 to 2016). Applying the relationship from the University of Reading model set out in the methodology section above (a 1 per cent increase in the number of households leads to a 2 per cent increase in house prices)
this increase in the population is expected to have led to a 32 per cent increase in house prices,
holding all else equal.

Over the same period (1991 to 2016) the non-UK born population of England increased by 4.8 million; from 3.5 million to 8.4 million (these figures do not sum due to rounding).
Applying the relationship between household growth and house prices derived from the University of Reading affordability model, the increase in the non-UK born population in England is expected to have led to a 21 per cent increase in house prices; holding all else equal.


For comparison to Ireland’s population growth


2016 April Census: 4,739,600
2021 April Estimate: 5,011,500

5 year increase: 271,900 or 5.7% total
5 year increase: 150,000 or 3.2% total Non-Irish net migration

So if we take it the above report findings that every 1% increase leads to a 2% price increase, Ireland’s population growth since 2016 accounts for house price increases of
+11.4% from all population increases
+6.4% from all Non-Irish net migration

I got the migration figures here in Table 1.3 which looks at net migration and how many were non-Irish nationals

1 Like

Thanks for the analysis.

Of course some of us are sceptical that the 5m population and the numbers of Non Irish net migration are undercooked, and it certainly feels that way it has to be said.

Many incomes have been stagnant in this time, yet tax incomes are rising and the country has gone from ghost estates to a housing crisis within 10 years, all of this adds to the feeling that the volume/population element of the equation is a very strong driver of the problems we are seeing.

I wonder is there a way to see how close CSO 2016 migration estimates were pre vs post Census 2016.

Might see a similar trend this time

EDIT: population April 2016 prelim was 84,000 under the actual Census figure

If the same were true for 2021 you’d be looking at c. 50K more Non-Irish net migration

Looking at these figures in more detail

Official CSO estimates are +271,900 population increase since 2016. Last Census was underestimated by 84,000 so this figure could actually be closer to +350K.
But if we use the current estimates +271,900 / 5 years = 54,380 increase per year.

We are told (no reference I’m afraid) average per household is 2.7 persons, so 54,380 increase per year / 2.7 persons = 20,140 new housing units per year required.

We track new dwellings here

New Dwelling Completions Q2 2021


Summary of New Dwelling Completions by type of dwelling
Period Single Scheme Apartment Total
2011 4,814 1,358 822 6,994
2012 3,501 964 446 4,911
2013 2,947 1,155 473 4,575
2014 2,975 1,795 748 5,518
2015 3,252 3,294 673 7,219
2016 3,646 5,061 1,159 9,866
2017 4,251 7,882 2,213 14,346
2018 4,676 10,971 2,261 17,908
2019 5,065 12,512 3,498 21,075
2020 4,943 11,668 3,924 20,535
Q1 2020 1,094 2,838 1,000 4,932
Q2 2020 868 1,837 524 3,229
Q3 2020 1,464 2,869 715 5,048
Q4 2020 1,517 4,124 1,685 7,326
Year 4,943 11,668 3,924 20,535
Q1 2021 968 2,261 705 3,934
Q2 2021 1,149 2,539 1,333 5,021
% change Q2 2020 to Q2 2021 32.4% 38.2% 154.4% 55.5%
% change 2019 to 2020 -2.4% -6.7% 12.2% -2.6%

2019 and 2020 actual new builds just about met this increased population demand.
2016 to 2018 fell well short.

And this ignores the pent up demand that was already in the system.

It seems we are basically building enough per year to only meet the increase in population of that 1 year. We are nowhere near meeting demand anytime soon.

As posted by Blindjustice elsewhere

We find that if population growth increases by one percentage point, house price growth increases by 1.4 percentage points.

So this report also foound, like the UK one above, that for every 1% increase in interest rates, house prices fall by 3%

Research I published 9y ago shows that interest rate changes have some of the strongest effects on house prices. If intr. rates were to go up by 1%, prices were to fall by 3%, all else equal. This is using US data; the effect in the UK should be stronger. https://t.co/B5MD8TnQir

— Stani Milcheva (@Stani_Milcheva) June 24, 2022