SCHOOL OF BUSINESS AND LAW
Factors Affecting UK Housing Market
Intake August, 2012
Written by: Milad Pir Mohammad
Table of Contents
Factors affecting Demand of a House in the Market
1.1 Price of the House
1.2 Rent of House
1.4 Household Income
1.5 Future Price Expectation
2.0 Supply of House in the UK and London
2.1 Price of the House
2.1 Availability and Price of land
2.1 Future Price Expectation
Government Policies affecting Housing Market
3.1 Availability of Mortgages
3.2 Interest Rate
3.3 Government Legislation and Stump Duty
This report economically analyze housing market in UK since 2006. The main purpose of this report is to find out key factors affecting house demand and supply during the period. diagram and graphs are presented along with related data judgment to support the main purpose. The graphs are mostly presented for London and Northern Ireland and UK as a whole. The Main target area of this report is London which has been compared with Northern Ireland and UK as a whole. Various relevant factors of House Market determinants have been focused and presented with relevant graphs to support the concept. London has experienced a big difference in almost all the things as compared with other parts of UK. High population density, foreigner interest, higher average income, and higher rent price were the major factors differentiating it from other parts.
Demand and supply is possibly one of the most basic concepts of economics and it is the pillar of a market economy. Demand means how much (quantity) of a product or service is desired by users. The quantity demanded is in fact the quantity of a product people are willing to buy at a certain price; the relationship between quantity demanded and price is called as the demand relationship. Supply refers to market and shows how much the market can offer. The quantity supplied is related to the quantity of a particular good producers are willing to supply in receipt of a certain price. The relation between price and amount of a good or service to be supplied in the market is known as the supply relationship. Price, in fact, is a reflection of supply and demand.
Factors affecting Demand of a House in the Market:
Price of the House: price of the house is the main factor in identifying the demand for a house in the market. The lesser the price, the more customer demand will be for a particular product. Similarly, Price of house plays an important role in analyzing UK housing market. London remained the most expensive place across UK since 2006. However, Northern Ireland remained consistently the least expensive region with an average house price of 149,000 GBP in 2011.
Source: Office For National Statistics
The above chart clearly illustrates that, despite recession, London consistently shown an upward trend in its house prices over the last 6 years period. However, Northern Ireland has been experiencing consecutive declines after it peaked at 2007. Therefore, the demand for London houses has fallen due to dramatic increase of prices. Keeping other factors (which are discussed next) constant, the demand for houses in London has decreased since 2006. As a result, there is a movement change in demand curve of housing market.
The non-price demand factors are:
Despite changes in price, which cause a movement along the demand curve for housing, other non-price factors are also considerable, and variation in these result in a shift in the demand curve.
House Rent Price:
Source: Residential Rental Price Index
References: 5. Greater London Authority. (2009) The London Strategic Housing Land Availability
Assessment and Housing Capacity Study
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