The Uk Housing Market

3049 Words Jun 25th, 2011 13 Pages
INTRODUCTION

In this essay, I will examine the factors that determine the price of houses in UK housing market. Firstly we will have a look the past and the recent history of UK housing market.
The UK housing market has been booming in the past few years, with prices rising much faster than household incomes. After its dramatic crash in the early 1990s, the UK housing market has staged a remarkable recovery.1
In the early 1980s widespread financial deregulation raised the availability of mortgage finance and stimulated the demand for housing. Real house prices rose by over 4½ percent per annum on average during the decade, with nominal house price inflation peaking at 28 per cent in 1988. Monetary policy was subsequently tightened
…show more content…
Buyers place offers for a property that the seller can either accept or reject.4

When the market demand for properties in a particular area is high and when there is a shortage of good quality properties then the balance of power in the market shifts towards the seller. This is because there is likely to be excess demand in the market for good properties. Sellers can wait for offers on their property to reach their minimum selling price. Conversely when demand both for new and older housing is weak and when there is a glut of properties available on the market, then the power switches to potential buyers. They have a much wider choice of housing available and they should be able to negotiate a price that is lower than the published price4.

When the demand for houses in a particular area increases, perhaps because of an inflow of population into the area, or a rise in incomes following a fall in unemployment, there is upward pressure on market prices.4
Often the supply of available housing in the market is relatively inelastic. This is because there are time lags between a change in price and an increase in the supply of new properties becoming available, or other homeowners deciding to put their properties onto the market. When demand shifts outwards and supply is inelastic the result is a large rise in
Open Document