In Britain, there is a certain fascination with house prices. There are at least ten indexes measuring house prices monthly, sometimes delivering contradicting results. There is a never ending set of TV programmes about buying houses in the UK and abroad, interior decoration, DIY, or making money on the property market. It all sounds so good and so easy. And it all assumes the market will continue its movement upwards for the foreseeable future. But will it?

Investors on the stock market are familiar with market fluctuations. They know prices go up, but they go down too. They know that mass psychology is an important factor in how prices fluctuate. When prices go up, a lot of people seem to think that will continue forever. When it doesn’t, panic settles in and the market reverses its momentum.

For that very reason, experienced investors have to ask themselves “What’s driving the price up?”

Is the house market similar to the stock market? The UK property crash in the ‘90s was pretty clear: prices can go in reverse.

However, for the time being, there’s no doubt, prices are dramatically going up for the UK residential properties. But why?

Moreover, UK residential properties have increased in value more than 6 times since 1980s, while the commercial estate prices have increased only 2.5 times.

What are the reasons that push the house prices up in the UK?

More people

There are more people in the UK and the population of the UK is predicted to rise from 60 million in 2005, to 62 million in 2011 and nearly 65 million by 2021. Immigration numbers have been underestimated in the past, so the actual numbers might be higher.

More houses required

That’s a no-brainer: more people implies more houses. But there’s another twist to the story. The size of the average English household has fallen steadily from 3.1 in 1961 to 2.29 today. The main driver at the moment is the ageing society. People live longer and share less. People also start a family later in their life and many people live alone.

Not enough houses

UK is not building enough houses to meet the demand to buy or rent. Estimations put the value of the demand for houses at 200,000 or even more each year. The offer is around 140,000-160,000 per year. Due to governmental policies, hardly any council estates were built in the last 20 years. Meanwhile millions of former council homes have been sold by local authorities. All this had the effect of forcing people who might have rented into buying.

Currently the UK builds about 3.1 new houses per year per every thousand of people. In 2002, UK built fewer houses than in 1921. Meanwhile, the rest of the European Union (before the enlargement in 2004) built at a faster rate of 5.1 houses per thousand population. The EU has now 448 dwellings per thousand population, compared to 431 in the UK.

Psychology

The combination of continually increasing house prices, lack of good quality, cheap rentals and the financial gains that home owners have enjoyed in the last decade have left a deep psychological imprint on the UK buyer. There is an urge to get on the property ladder by all means.

Others

Added to the arguments above is the fact that in the UK there are many houses and a bias towards that. Houses are better for control and privacy but take more habitable space than flats.

Also, for a long time, mortgage repayment rates on UK properties have been cheaper than rent.

All these factors contribute substantially to the increase in house prices. At the moment building properties are highly restricted by planning laws. It is much easier for commercial estates to get planning permissions as this is seen as creating jobs and contributing to the local economy.

What can be done about it?

It’s up to the government to change direction in regards to housing. There have been some proposals to relax the planning laws to allow for builders to build more houses in the areas that people want to live in. So far, there has been no desire to act on the problem of houses. As long as that continues, we can safely assume that house prices will continue their way upwards.

There are twice more Brits owning a holiday home in the sun that two years ago, figures have shown. About 800,000 people in the UK have a property in the sun, a 45% increase since July 2004, according to a survey by research analyst Mintel.

Three per cent of the British households intend to buy a holiday home abroad in the future, while five per cent are thinking of moving away from the UK altogether. Owning a second holiday home abroad had become an ambition for many people. The UK property boom increasing the housing equity, cheap flights, combined with a strong marketing by shows like "A place in the sun", have fuelled the ambition of owning holiday properties abroad.

According to the survey, Spain remains at the top of the list of destinations, with 4 out of 10 naming it as the preferred destination. France followed in second place with 26 per cent of people wanting to move there. Australia was the third most popular country with 22 per cent of people preferring to move there. Italy and US came 4th and 5th with 21 per cent and 17 per cent respectively.

Oasis Hong Kong Airlines are the first to offer low-budget long-haul flights in what it seems to be the beginning of a trend (if all goes well for Oasis). They are offering a cheap economy one way from London to Hong Kong starting from 75GBP (112GBP with tax). Business class starts from 470GBP one way.

They claim the cheap flights do not come with a decrease in comfort, promising comfortable seats, multiple meals, audio channels and personal TV screens. For instance, the seat pitch in economy will be 32'', which is the same or even better as other companies offer between Hong Kong and London.

The inaugural flight between Hong Kong and Gatwick suffered from some problems with the Russian authorities who claimed Oasis didn't have clearance to fly over Russian space. The service eventually took off and the airline issued a statement saying the journey times will be affected as they had to change flying route. The move added 1 hour and 10 minutes to the published schedules.

Oasis Hong Kong Airlines is a budget airline based in Hong Kong and using Hong Kong International Airport as its main hub. The first long haul route will be a direct London - Hong Kong route, with destinations in the EU (Milan, Berlin, Cologne/Bonn) and in the US (Oakland, Chicago) to follow shortly.

Oasis was established in February 2005 by a pastor, Rev. Raymond C. Lee and his wife, Priscilla H. Lee. The CEO, Steve Miller, was the founder and CEO of another Hong Kong based airline, Dragonair.

Oasis is flying 2 ex-Singapore airlines Boeing 747-412 aircrafts. The configuration will be 81 Business class seats and 278 Economy class seats.

The move is very relevant for the holiday home owners as it might mark the beginning of a trend for cheap air flights, which in turn might see holiday home owners moving further away from their home ground in their hunt for bargain holiday home deals. With the European real estate market becoming more and more competitive, it's a move many holiday home owners will contemplate. It's a move that, if successful, can really open the Asian real estate market to the European holiday home owner.

While it is a good news for holiday home owners who have more options, it is however a bad news for the environment. As flights get cheaper, more people are encouraged to fly and more carbon emissions we release into the atmosphere.

If you're thinking of buying a holiday home abroad, you seriously should pay attention and learn from the story of Bulgaria. Bulgaria has been the newest hype word around the international property market. It has been marketed furiously as the new El Dorado for holiday homes.

When it comes to buying properties, abroad or at home, it's all about location location location. However, if you're a property investor, it's also about price, it's about being the first in a market, about spotting the trend changes and picking new trends before everyone else. And Bulgaria seems to have all of these. It's located in Eastern Europe, soon to join the EU. It offers something for everyone's taste, as it has nice beaches at the Black Sea and also mountains quite popular with skiers. It's also very cheap, but the prospects are there, as EU will pour money into Bulgaria into the next decade.

So what's wrong with Bulgaria?

It's been over-marketed and a lot of investors have rushed in to buy cheap and sell in couple of years for a handsome profit. In the meantime there is always the rental market. Holiday home rental market is a viable means of paying for your property or, at least, for the inherent maintenance costs. The demand for Bulgarian properties has been huge. And, in turn, this has awakened a whole generation of property developers. The result: over-development.

The over-supply of holiday apartments, holiday villas and other holiday homes has created a dramatic competition on the holiday home rental market, with the returns for holiday home owners plummeting. The annual rate of capital growth has also dropped from a 36% in 2005 to 13.9% in September 2006, according to Assetz Property Investment Tracker.

On the rental market, the return on investment has plummeted from 116% in 2005, to just 35% in September 2006 according to the same source. The drop in the return is also aggravated by the poor management from local agencies.

Should you avoid buying in Bulgaria altogether? The answer is no. But you have to take into account this worrying trend. You can still buy in Bulgaria, but do your own research. If you want to rent your holiday home, research where tourists are going. There are hotspots and there are dead spots. In the end it's all about location location location. Put yourself in the shoes of a regular tourist. Who is your targeted regular tourist anyway? Where would they go? That's where you want to buy your dream holiday home for the best rental return on your investment.