An Investigation into the Housing Market Essay

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An Investigation into the Housing Market Economics Describe and analyse the changes of housing in the local area over the last 5 years The housing market is one of the most talked about topics in the news. I assume this is due to the high influential potential it holds to the rest of the economy. In this essay I will focus on the causes in house prices. I will investigate how prices have changed nationally and locally. I interviewed an Inter counties estate agent to help my investigation and get his views on the situation. The price of housing fluctuates enormously. Not only does it vary from region to region, but also it is also very volatile within these regions. There are many causes for these unstable prices. …show more content…

For example, if a house costs £200,000 and to buy this house a mortgage is needed of £100,000 and the interest is 4%, this makes an annual interest rate of £4000 per year. Although 5% may not sound like a big difference, if we calculate the difference it would increase the interest rates per year by £1000 in this situation making a grand total of £5000. Since they have taken £100,000 out of their savings, they no longer receive interest for this money, which would have otherwise been in the bank. If the savings interest was 3% they not only miss out £3000 interest rates. Instead, they have to pay interest, which means altogether they have £7000 less. (-£4000 mortgage - £3000 loss of interest) This money is found especially difficult to give out by first time homeowners since they already may have to pay tuition fees and are only on very low paid salaries, (usually £200,00.) Therefore if interest rates go down, house prices increases will slow down because people know that's costs are higher so demand for houses decreases. Less demand means lower prices. If people want to buy a new house after 5 years a 4% they will have paid £2000 there for would need to sell their house at a minimum of £220,000 just to cut even with their expenditure. However, this does not take into account the loss of interest on the savings. So this would mean they would need a house price increase by a

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