Taking Examples From Either The Housing Market Or The Commercial Property Market, Outline And Discuss The Economic Factors Influencing Supply And Demand For Your Chosen Property Type

1004 words - 5 pages

The housing market in UK has been effected in many different ways, from immigration to shortages of homes I am looking to discuss these factors in depth.

The demand of houses depends on what the interest rates are, as this will decide whether the buyer will be able to get a mortgage at a cheaper rate. The lower the interest rate the more demand of houses and the more demand in houses the higher the price. The supply will depend on what the price of the house is. The higher price seller will get more people would want to sell it. This is short term as when more houses appear on the market it will lead to a reduction in price if there isn’t enough demand. A possibility to why the demand ...view middle of the document...

Renting is the alternative to buying but recent statistics have shown that renting has risen faster than incomes. In some cases the price of housing is now rising faster than renting but it still makes economic sense to buy rather than rent however buying is much more difficult.

There are several constraints on house building, the government has a reluctance to build new homes. House building is at its lowest level since the beginning of the Second World War, statistics show that on average of 135,000 homes are being built, less than 200,00 necessary to keep up with the demand. There are many factors which effect why homes aren’t being built, communities have a strong attachment to preserving “greenbelt land” and many areas are protected from housing development. Also the lack of social housing, development has been very low.

Another factor affecting the housing market is the price of homes. Newly weds are finding it harder to step onto the property ladder and are being forced to rent due to money issues and banks having to tighten their lending cap. It is becoming increasingly difficult for first time buyers to get on the property ladder. This is mainly due to the rise in house price to earnings ratio. In the past this problem was got around by banks being willing to offer 'generous' mortgages (e.g. interest only, self certification, 100% mortgages). For example, in the past, the Abbey National lent 5 times a borrowers salary. This increased generosity in lending helped to keep the market buoyant without addressing the underlying problem of overvalued house prices. The Credit crunch has now made this difficult. At the moment, the lack of mortgage finance is one of the most significant factor in falling demand for housing. The Council of Mortgage Lenders suggest that mortgage approvals have fallen to the lowest levels since 1991. Up to July 2007, mortgage...

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