Increasing income and stable occupation enable disbursement more money to purchase a house. This means that the higher the income and the lower the unemployment rate, the greater is the demand for a house. As a consequence, house monetary values are besides raised. For illustration, UK ‘s GDP growing rate in November, 2006, harmonizing to Office for National Statistics ONS, reached at 0.9 % and continued to lift till the terminal of twelvemonth 2007. Equally good as, the unemployment rates ever stood in low degree, ne’er over 5.6 % during this period ( ONS ) . Consequently, the Land Registry ‘s quarterly study, out on Wednesday, 8 November 2006, shows that the mean house monetary value topped ?200,000, and so remained in this degree to the terminal of 2007 ( Nationwide ) . “ A strong economic system and still accommodating funding conditions are assisting support strong lodging demand and above norm activity in the market ” and “ conditions will stay steadfast into 2007, ” said the senior economic expert at the Royal Institution of Chartered Surveyors, David Stubbs.
By a contrast, economic recession causes important cut downing the purchasing houses demand. When the recession started, the unemployment rate has aggressively raised from 5.2 % ( May, 2008 ) to 8.0 % ( July, 2009 ) . Therefore, house monetary value showed the fastest autumn since 1991 ; the mean monetary value was ?173,583 in May, 2008 ( Nationwide ) , and so continued to fell to ?159,900 in December, 2008 ( Halifax ) . The unemployment rate has remained in high degree ( ne’er lower than 7.9 % ) boulder clay 2012 ( ONS ) ; GDP has besides growing negatively by -0.4 % during 2012 ; hence, house monetary value, the Nationwide reported, fell by 1.4 % in September, 2012. Robert Gardner, the society ‘s main economic expert said, “ The weaker monetary value tendency observed in recent quarters is unsurprising, given the dissatisfactory public presentation of the wider economic system ” .
1.2. Mortgage Lending and Interest Ratess
In UK, the bulk of people are funded by a mortgage loan for house purchase. Conditions of mortgage loan and involvement rates, as complement merchandises, strongly affect the demand for purchasing house.
In the first half of 2012, the Bank of England offered assorted attractive mortgage merchandises ( for illustration, a crisp cut in the cost of long-run, fixed-rate mortgages for people with at least a 40 % sedimentation ) and held involvement rates at 0.5 % , a record depression rate, to back up lodging demand, overall UK ‘s house gross revenues were 11 % higher than last twelvemonth, but in fact, house monetary values, harmonizing to Nationwide, still fell by 1.5 % .
On the other manus, in 2008, the recognition crunch leaded to the deficit in mortgage merchandises, discouraging people to purchase houses. As a consequence, house monetary value fell by a record 16.2 % in December, 2008 ( Halifax study ) due to the crisp lessening in lodging demand.
1.3. Demographic factors
In the 2006-2012 period, UK population has increased by 2,622 1000s ( ONS ) and figure of families has besides risen from 25,750 to 27,330 1000s ( Department for Social Development in Northern Ireland. ) . There are some chief grounds such as a diminution in household size and matrimony rate, a growing in divorce rate and net in-migration from Eastern Europe and life anticipation, etc. Those have made lodging demand in UK addition ; nevertheless, mean house monetary value, harmonizing to Land Registry, somewhat fell to ?163,376 in August, 2012 because of other factors.
1.4. Renting House
Due to the recession, lodging market has been altered ; twelvemonth 2009-2011 showed that fewer people than of all time were purchasing their houses. 34 % figure of families in England 2010-2011 rented their houses ( English Housing Survey DCLG ) . Renting house plays a utility merchandise ; more rental demand causes less buying house demand.
The rental market was improbably strong that pushed cost of leasing was higher ; in theory, it makes some people back into purchasing. In fact, figure of purchasers has fallen perceptibly over the last four old ages ; although, now purchasing a house is over ?130 cheaper a month than leasing ( Halifax ) .
2. Supply Side Factors
In the short tally, supply affects monetary values less than demand because constructing a new house takes a long clip and obtaining planning permission is hard ; hence, supply for lodging become fixed. However, if lodging supply is inelastic, an increasing in demand will do a immense increasing in house monetary value.
Long tally supply
2.1. Cost of Building
Building costs include stuffs and labor costs that have a important on supply. A deficit of stuffs and labor push up the cost of stuffs and the pay rate, and so do an addition in edifice costs. It makes the supply curve displacement to the left.
During the 2010-2012 period, stuff cost, for illustration, have gone up due to an addition in monetary values when the economic system has rebounded after the recession, every bit good as labor costs have risen ( ne’er under 100 index points from January, 2010 in UK harmonizing to ONS ) . As a consequence, lodging supply has decreased and been unable to maintain up with demand in recent old ages. There were merely over 100,000 new houses were built in UK in 2010 ( ONS ) . It caused the mean monetary value of a house increased by 8.6 % or ?13,000 from the start of 2009 to the same period of 2010 ( Nationwide ) .
2.2. Number of Suppliers and New Houses
Many providers have gone out of concern during the recession, said Don Magruder, frailty president of Ro-Mac Lumber & A ; Supply based in Leesburg. Builders find better net income from other types of investing. Despite increasing demand, figure of new houses in UK aggressively fell from over 200,000 to more than 100,000 in the 2007-2009 period ( ONS ) . Builders did non desire to construct houses because they concerned that the impacts of recognition crunch started in 2007 made their houses can non be sold.
In this twelvemonth, building end product is expected to drop by 6.3 % , reported Construction Products Association. In general, figure of new houses in UK is ever low that makes the deficit of lodging ; it is the cardinal factor explain why house monetary values in UK are ever more expensive than other state.
II. The Effects of Government Policies to House Monetary values
Harmonizing to Communities and Local Government Department, lodging policies of UK Government aimA addition the figure every bit good as quality of houses, including low-cost houses, to purchase and lease through entree to mortgage finance and by reinvigorating Right to Buy, bettering the flexibleness of socialA lodging, and work out homelessness issue. Therefore, house monetary values are influenced by a scope of authorities policies.
Taxs are the most obvious and simplest policy that affects house monetary values. Assorted revenue enhancements make the cost of selling and purchasing a house become more expensive. However, the Government uses these revenue enhancements to promote increase institutional investing in lodging market and lifting house value.
Besides that, the Government encourages people to have their houses more than leasing a house through the policy that proprietor occupier possibly pay 18 % less than renters for the same belongings after revenue enhancement.
The Government controls the house monetary values by commanding Bankss to maintain a sensible involvement rate in all the clip. When the lodging market has gone into Greies due to the recession, the Government launched some consumer stimulation bundles by leting Bankss provide many attractive mortgage merchandises every bit good as cut down involvement rates to promote raising lodging demand.
3. Low-cost lodging
The Government plays a critical function in the measure and quality of low-cost houses provided. If public subsidy for societal lodging addition and the troubles on land handiness are solved, more low-cost houses will be delivered. Registered Social Landlords ( RSLs ) can besides give private house builders lower land costs and easier edifice permissions to necessitate them to bring forth low-cost houses.