Estate agents organise the sale or lease of properties for commercial or residential purposes. As property is a large expenditure with long term commitments from buyers, a customer's ability to buy property will be largely dependent on macroeconomic factors such as; interest rates, inflation, unemployment, income and the business cycle.
Possibly the most significant factor in determining the success of UK estate agents is the rate of interest charged on mortgages. As houses are a large expenditure few people can afford to buy one outright, so most people rely on a mortgage to enable them to buy. Mortgage rates are the percentage of the loan that a consumer has to pay to the lender in return for the loan. Mortgage rates in the UK are influenced by base rates set by The Bank Of England. Currently interest rates are relatively low. This should have a beneficial impact on the success of estate agents as more people can afford to buy houses. Having more potential buyers encourages potential vendors to put their houses on the market so selling becomes easier. As estate agents work on commission, the number of sales is a key factor in their success. If interest rates rise, fewer people will be able to afford to take out a mortgage so fewer houses will be sold. This will have an adverse effect on the success of UK estate agents as they will have depleted revenue streams.
Inflation is another significant factor which determines the success of UK estate agents. Inflation usually occurs when a country prints more money than is justified by the country's wealth. Inflation causes prices to rise each year, the UK has an inflation target of 2%, which is set by the Bank Of England. This is set to ensure the economy is stabilised. Currently the UK inflation rate is 2.7% but RPI inflation which includes housing prices is 3.1% this is higher than ideal and may result in fewer people buying houses as prices are too high. This is because inflation is not usually in line with...
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