The Housing Market In The Uk Economics Essay


In this coursework I am traveling to analyze the lodging market in the UK. To see market stableness and see how the UK lodging market looks and what alterations and affects have occurred. Therefore I will be transporting out probes and analytical research into the UK lodging market to see how supply and demand has influenced the market in the UK.

Hence I will besides be looking at the affects of the monetary values of the UK lodging market as a whole, and the manner the supply and demand factors have contributed to the cause of the addition in monetary value. By making this it will enable me to set up why belongingss in the UK have increased.

In the UK before the 1980s the lodging monetary value were high and at a roar, nevertheless this was about to alter when in the early 1990s the UK lodging market declined and endured a recession. This occurred due to their being a high degree of unemployment meant that the monetary value of the lodging had fallen and many belongingss were now negative equity. No longer was the lodging market high and in much demand. This was about to alter in 2000 where once more they was an addition in the house monetary values in some peculiar countries in the UK and one time once more the demand monetary value had increased.

The manner that these monetary values are affected is that as demand additions for the houses and the supply is limited. To provide the demand, this so creates an affect of the lodging monetary values to increase and leads to demand to be greater so the sum of houses they are available. Hence the ground for this was that due to their being market stableness and low involvement rate because of bank of England. Many place proprietors were now able to borrow the equity as their belongingss were doing them able to purchase more than one belongings?

Supply and Demand

The job here is that due to their being a limited sum of belongingss that are available in the UK. This hence created a roar in the market and as a consequence the lodging monetary values dramatically increased. Hence by looking at the causes of the demand and supply we can see the ground for the UK lodging market to be affected and to alter.

Additions in Demand

The grounds why the UK lodging market has been affected and the demand to increase is that foremost due to their being an ageing population in the UK, this means that people are now populating longer and so belongingss are non as widely available as they used to be. Therefore as a consequence as the population increases in the UK, they are fewer places available for people to buy.

Another ground why they have been an addition in the demand is that presents due to many people make up one’s minding to stay individual and high degree of separation and divorce occurring. It has meant that as more and more of these people wish to buy a belongings of their ain.

Besides another factor which has caused the demand for the belongingss to increase is that they are a batch more foreign investors desiring to put into the UK lodging market. By many foreign investors puting in popular countries like London, it causes the demand in those countries to be really high and limited. Besides due to high monetary values in London most people tend to purchase away from London this is known as a Green Band country for illustration Milton Keynes, as it is lot inexpensive to transpose due to improved transit links, ( Rail and M1 links ) .

Due to the addition of incomes of those that are employed this besides increases the demand for belongingss. By consumers holding higher income degrees, it means that they are more likely to afford a belongings and so this would make an even greater demand for the belongingss and higher house monetary values.

Besides due to UK now going a member of the E.U this has meant that they is a batch more immigrants from other European states coming into the Britain. Therefore due to the big inflow the UK lodging market needs to provide the demand for more belongingss to suit and house these people. So by there being a limited sum of supply, the lodging market displacements that monetary values up to steady and command the rate of demand and supply in the market.

Therefore due their being low nominal mortgage involvement rates this means that they is a batch more competition of mortgage suppliers. In which they want to offer and sell low involvement rate mortgages to consumers. Due to the low involvement rate this allows more and more consumers to obtain low involvement mortgage rates and increases the demand to buy a belongings. Hence Bankss are more likely to impart more than they did in the yesteryear, some Bankss have offered to impart up to 5 times more than their existent income.

Changes in Supply

So as the demand increases in the UK lodging market and more people desiring to buy a belongings, this has meant that the supply is besides been affected. As the monetary value additions they are more incentive to sell and do supply to besides increase. Besides every bit good as this we need to take in consideration of the four factors of production which are land, labor, capital and endeavor. Because in the short tally the supply is inelasticity as it takes clip to construct new houses.

Therefore the manner that the supply is affected is that every bit due to the demand increasing, it creates a deficit of good quality places in certain countries. So due to their non being good quality belongingss, the market reacts by forcing the value of the belongingss even further.

Another ground why the supply is limited in the UK lodging market is that they are a batch more demand for 2nd manus places. Because by their being more people desiring to buy 2nd manus places this creates a limited deficit of 2nd manus places that are available. Here we can see that there is a absolutely competitory market for 2nd places in the UK lodging market.

Due to the land monetary values and stuffs holding increased it has meant that they are a batch less good quality houses being built in good countries in which attract consumers. Because of consumers are non really enticed to buy these peculiar places. Therefore this limits the supply of peculiar types of places available. So as a consequence it means that people now have to pay a batch more for their coveted belongingss so they would hold in the past due to the deficit.

By looking at the supply and demand tabular array below we can see how the UK lodging market is affected when the above occurs.

Rise in Demand Pushes Prices Higher



monetary value


Supply of the lodging tends to be inelastic

In the short tally


Due to the market demand being strong and increasing

We see the monetary value besides increases upwards





Looking at the above tabular array we can see that as the demand is far greater than the sum of belongingss that are available, this causes the equilibrium monetary value of belongingss to increase well. The ground for this is that as the supply is inelastic, and the demand line displacements out so does the equilibrium monetary value

Regional Variations

Besides due to their being a distinguishable regional fluctuation of belongingss in the North and South this besides influences the demand factor. Because one of the chief factors for belongingss to be in limited supply and high monetary value is due to regional fluctuations of North and South. Therefore many people want to buy and populate near the capital ( London ) due to the many benefits that it has got to offer.

The ground why many people want to populate and purchase their belongingss largely in the South of the UK is due to the undermentioned penchants: –

First one of the chief ground why buying a belongings in the South is more appealing is because they are a batch more employment ( occupation vacancies ) available in the South compared to the North. Reason for this was that many of the Northern countries had more fabrication industries than the South such as coal mines and fabric industries. Therefore once the fabrication industries died out and declined due to companies purchasing cheaper goods abroad, it caused a big addition in unemployment and many Northern towns to be out of work. Alternatively many occupations such as the service industries shifted to the South and Midlands. Therefore by their being a batch more occupations in the South and Midlands many people decided they wanted to purchase and settle in countries where they were work. Where as they knew that they are a batch more likely to be in employment and obtain higher degree of wage and life criterions compared to the North. Hence because of this it offered many people a long term fiscal security and a better quality of life so if they were in the North.

Besides due to their being a low degree of unemployment in the South this besides cause the offense rate to be a batch less and makes these countries a batch safer and secure from offense, larceny and so on. Therefore due to the low degree of offense rate in the South of England many people want to buy belongingss in those countries, which cause the demand to increase.

Another ground is that they are a batch better schools in the South so they are in the North. So by many parents desiring to populate in the South of the England they believe they will be able to put their kids in better schools due to them measure uping and populating in the catchments countries. So by populating in these countries parents believe that they can put their kids in good schools. In which they are more likely to have a better criterion of instruction so if they lived outside the catchments country.

Therefore due to the popular belongingss being in the South East of England and closer to the capital, it means that they are a batch more investing in these countries. Therefore due to the immense investing in these countries we see that these countries are a batch more developed, for case we can see that in the South East of England they are cleaner countries better roads and better conveyances systems. Hence due to the regular investing in these countries more people want to populate and purchase a belongings in these countries as they are non deprived.

Therefore the tabular arraies below shows the demand increasing for belongingss in the South and


House monetary value South



New equilibrium


Original equilibrium


D1 Quantity

House monetary value North



New equilibrium

P1 Original equilibrium


D1 Quantity

Looking at the above tabular arraies of the demand for belongingss in the South and North, we can see that they are a batch more demand for belongingss in the South. Hence due to their being a high demand we can see that the monetary value has besides increased well particularly for the belongingss in the South.

Absolutely Competitive Market

Absolutely competitory market is when the actions of the single Sellerss and purchasers have no consequence or market power to act upon the monetary values. Hence it does non count how much the end product the house sells, because it will merely acquire the exact market monetary value.

In the instance of the lodging market the market can sell as many houses at this monetary value but if it sells the houses above this monetary value than it will free all its clients. Therefore this shows that the UK lodging market is a monetary value taker.

Looking at the statistics collected by Nationwide Building Society in the above tabular array, we can see that the monetary values of the belongingss have increased aggressively upwards over the old ages.

So by looking at the lodging market in the UK we can see that there is a really high demand for belongingss. So by the market holding a high demand for belongingss it besides has a market set monetary value. In which the purchasers are expected to pay in the scope of this monetary value if it wants to obtain a belongings of this nature.

Therefore if the estate agents were to increase and sell above this market set monetary value it will lose all of his clients. But on the other manus if it were to sell below the market set monetary value the estate agents would be more likely to pull more clients and sell more belongingss.

Looking at the tabular array below we can see that the UK lodging market is a perfect competitory market, in which it can sell every bit much as it wants at this market monetary value.

Perfect Competition

Monetary value




End product of houses q

Absolutely competitory in the long tally

Monetary value Second



Q1 Q2 Quantity

Therefore by looking at the above tabular array we can see that the 2nd manus lodging has increased from S to S1. Hence by the supply increasing this will assist to cut down the high monetary value and demand of these houses. This would intend more belongingss would be on the market for consumers to buy as the measure will increase to Q1-Q2.


Therefore they are many factors that affect the UK lodging market as a whole, which I have described above, but one of the chief factors is the Supply and Demand of UK belongingss. Because due to their being a limited supply of good quality belongingss and a high consumer demand, this causes the monetary values to increase and makes belongingss to duplicate in value in a short period of clip. For case belongingss near the capital are far greater to be in limited supply so are likely to hold a really high value monetary value. In order to work out this job in the long term the authorities needs to make an enlargement in house edifice, so that they can be more handiness of belongingss in the market. Because by there non being adequate belongingss on the market the back cilium is that the monetary values are traveling to increase even further and do it even hard for consumers and first clip purchasers.

Another factor that has affected the lodging market is the low degree of Unemployment because due to many people holding better occupations it means that more people can afford to buy at that place ain belongingss. Therefore due to more people desiring to buy their ain places this causes a limited sum of belongingss on the market. So due to the high demand this causes the house monetary values to besides increase well and those without good occupations to fight.

Regional fluctuation is besides another chief cause for the supply and demand to increase in the UK. Because due to some countries particularly in the South being really popular due to the benefits they offer, this creates a high demand. Which as a consequence causes the supply to be really limited and belongingss to be expensive as the value of these belongingss increase quickly? Therefore the manner that this job could be helped is that the authorities could construct more places in popular regional countries, where they are more employment.

Governments could besides put more money in the North so that it can promote unemployment and lure more people to purchase and populate in the North. For case by the authorities bettering metropoliss like Manchester and Liverpool, which is voted the international metropolis of Europe it has lead North to be appealing one time once more. Besides every bit good as this they are more metropolis inhabitants whom are looking for 2nd places in the state such as the North.

By transporting out this assignment I have learnt that they are many other assorted factors that have influenced the lodging market. Although there are many other factors that affect the lodging market, it could be argued that the inquiry is excessively wide to reply within the assignment. Besides it is difficult to come to a concise decision because the factors impacting the markets have different impacts on the market itself.