Demand Side Factors For The House Prices

1493 WordsDec 14, 20156 Pages
Discuss the extent to which demand side factors as well as supply side factors are likely to influence house prices. Lauren Gurnaud Student Number: 3500136 MSc Real Estate – Real Estate Economics and Finance Module Contents Page 1. 1 Introduction 1. Introduction The housing market affects both consumers and economic stability, as it is a key component to the economy. Barrell, Kirby and Whitworth identified that UK house prices have a strong cyclical pattern (2012). As you can notice on the graph below, the real house price line reiterates the point above. The trend is displayed by an upward curve meaning that prices have been seen to have an overall increase over…show more content…
2. Demand Demand in the property sector can be defined as the quantity of space or number of units demanded at various prices (Jowsey E., 2011). The fundamental principle of demand can be identified in the figure below: (Jowsey E., 2011) The figure above indicates that demand tends to decline with price. In other terms, higher prices will be noticed when smaller numbers of units or space are on the market. As Jowsey (2011) said “an important trait of the demand curve is the sensitivity of quantity demanded to price changes”. As we have established the demand aspect, we need to now look at the quantity/supply side. 3. Supply Supply is usually referred to as a schedule that reports the quantity of housing units or commercial space supplied at different prices (Jowsey E., 2011). There are 3 supply concepts that need to be considered in the property market: the short-run aggregate supply, the long-run aggregate supply and the new construction. The figure below illustrates these: (Adapted from Jowsey E., 2011) Put all the graphs together 4. Equilibrium Demand and supply curves relate price to quantity. In a perfect market, demand and supply would meet at an equilibrium point. The diagram below illustrate the equilibrium concept, the point where both curves meet meaning that at this point in time, demand and supply are equal. Find a Graph to show equilibrium As it will be seen in the next section of this essay, changing an underlying factor may
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