Contemporary Business Environment: Evaluation of UK Housing Market

This report evaluates the changes in the UK housing market from 2009-2019, the economic determinants of these changes, the impact of government actions, and the predicted impact of COVID-19.

Contemporary Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
Evaluation of Housing Market.........................................................................................................3
1. How have average house prices in the UK changed over the period from 2009 - 2019?.......3
2. What are the economic determinants of the changes?.............................................................5
3. How has government action over the period 2009-2019 affected the UK Housing market?..7
4. Predict what would be the impact of COVID-19 on UK Housing Market?............................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business Environment can be defined as combination of all internal and external factors
that affect business operations. Internal business environment consists of factors that exist within
business organisations. These factors are resources, policies and practices of the organisation.
External environment consist of factors that remain outside business environment and business
environment affect business functioning. Other than existence of factors division and difference
of the business also involves that internal factors are controllable and can be changed according
to the requirements but on the other hand external environment of the business cannot be
controlled by organisation. This report will discuss about housing market of the UK and how it
has affected and changed over 10 years. Housing marketing is the market which includes
functions like buying and selling of the houses in UK. Changes in price is result of several
factors and these are known as determinants of changes. Government actions also play important
role in changing the housing market and presently prevailed situation of Covid-19 which has
affected all areas of the economy will also have impact on housing market and this will be
discussed in the report.
Evaluation of Housing Market
1. How have average house prices in the UK changed over the period from 2009 - 2019?
Housing in UK is representative of largest asset class in non-financial sector. This only
suggests that housing market in UK is very strong and prices of the house in UK have also got
affected by this (Subramaniam, 2020). Average price of house in UK has significantly changed
from 2009. The prices in 2009 was significantly reduced then it was a previous your. In 2009 the
average price of housing covers around 157 234 which was less then compared to prices in its
previous year. What followed by this the price of house increased in 2011 and from that time
prices of house start increasing and in 2010 price of average house average price of house was
around 167 469 and this in July 2010 was 173 427. The price again in 2011 changed to
167300compared to 2010 it was less and the average price of house remain lower 2011 2012
2013 and compared to 2010 the prices of house increased in 2014 where average price of house
was 1745 92. This means that between 2010 in which price increased compared to 2009 to 2014

price of houses were at average and there was no much changes in the prices of house. However
from 2014 the price of houses changed and as compared to 17 8182 in 2014 average price of
house in 2015 was 190665. As of 2014 average price of house kept increasing and this is the
reason that in 2016 in the average price of the houses increased and came to 205 464. Compared
to there was a significant change in average price of the houses. In 2017 price of houses were
215 243 average price of the house in January in 2018 was 224544 budget 2019 the average
price was 2283 14 and this is that average house price was increasing by around 10000 and the
difference in average price of the house in 2018 and 2019 was not much and was very less
compared to increasing leverage price before 2018 (Wu and Lux, 2018). Compare the price of
January 19 the price in July 19 was 2327 11. This show a higher increase in price and later in the
year in August October the prices were similar and there was no much difference in the prices
but coming to December 19 the price of houses in UK market reduced to 233 309 the price in
October 19 was 233 235. 2019 also experienced least increase in the price of house from the year
2014.
Figure 1Average house price in the United Kingdom (UK) from January 2007 to February 2020(in GBP)
The data discussed suggests that average prices in UK market has kept changing and in the year
from 2009 to 2019 average price of the houses come through a significant increase and this
significant increase in the average price of the house was seen from 2014 to 2019. Before 2014

prices were increased compared to significant reduction in average price of house in 2009 but
they were not changing considerably and this change was experienced in 2014 (Munro, 2018).
Though average price of houses was increased in 2010 but in following years this again reduced
and changes were insignificant. 2019 December after long time experienced a reduction in
average prices of the houses in UK house market.
2. What are the economic determinants of the changes?
Economic determinants of the changes are those factors that plays important role in
changing the prices of the housing market in UK (Choudhry, Hassan and Shabi, 2019). Major
economic determinants of the changes in the price are mortgage rate, supply and demand force of
the house in the market, cost of housing and cost of renting. These are some of the most
important factors affecting the price of house. These are discussed as
Cost of House
This is one of the most important reason and determinant for the price of the house
because cost of the house refers to cost which has been incurred in the building and creating the
house. Cost of house when increases this increases price of the house and in case cost of the
price decreases the price of the house. There are several reasons which increase the cost of the
house and major reason is inflation in which everything becomes costlier and this affect overall
price of the product. Due to inflation and increase in price of the factors of cost of house cost
increases and this subsequently increase the cost of the house. Cost of the house and including
factors are cost of material, cost of land and cost of labour in a country. Cost of house increases
followed by increase in cost of all these factors.
Demand and Supply Force
This is another and most important factors affecting the price of the houses in which
demand refers to what is the demand of the house in the market of UK and along with this what
is the supply of the houses in the market (Baptista and et.al., 2016). Supply can be described as
availability of the houses in UK market. In case demand outweighs supply this result in
increasing the price of the houses. This is the reason that prices of house in UK market has
changed because of increase in demand from and after 2009 and after 2013. Because in both
these years price of the house was increased in years followed by this year this can be said as in

2010 and in 2014. Demand and supply are major economic determinants which affect the price
of the product and price of the product gets significantly affected and houses are not exception to
this. increase in demand of the houses and limited supply of the houses increase the price
whereas limited demand and followed by limited supply keeps the price average and unchanged.
Limited demand and increased availability and demand of the houses on the other hand decrease
the price of houses.
Mortgage Rates
This is another economic determinant to affect the changes in the price of the house or
residential property. Mortgage rate can be define as read at which people are able to get housing
and mortgage in UK (de La Paz and White, 2016). This means that when price of mortgage is lo
people are more likely to guitar house on mortgage. On the other hand when price of note case is
high people will choose to buy house rather than give the house. Price of mortgage has
constantly kept changing and the price has changed from 2014 and his experienced a reduction.
Another aspect of mood cages that when price of mortgage is low in such case owner of the
house would like to sale the house rather than availing it on mortgage. This is one of the reasons
that after reduction in mortgage price from 2014 price of of houses UK house market has
changed and increased. In terms of housing market this is an important economic determinant off
the price and affects the decision of buying and selling the house. Price effect both owner as well
as the person availing the house on mortgage. Low price of mortgage is beneficial for mortgagee
but is not beneficial for owner of the house. In this situation owner will look sale the house and is
the demand for house has been generated this will increase the price of the house.
Cost of renting
Renting house is another option available to those who cannot buy the house (Begiazi and
Katsiampa, 2019). This means that in exchange of rate people can use the the residential property
and in terms of residential property and Housing this is one of important economic determinant
of the price. Cost of renting when is is higher in such situation people go for the option to buy
the house especially when there are several options available through which taken get the loan
for buying the house and can pay back the loan on easy terms. This situation leads to the decision
that buying the house with individual ownership is superior than renting the house. This means

that when rent of the house is expensive and price of the house due to Limited demand is is
affordable in such situation individual will by the house rather than renting it. On the other hand
when price of the rent is affordable and price of buying the house is considerable higher in such
situation people will to stew get a house on rent rather than buying the house. This also get
varied on the basis of locality and city in which individual is looking to rent house as in urban
area and major cities of UK price of renting and price of buying house both are high.
Availability and feasibility of availing the loan
Availability of the loan refers to what extent a person can avail the loan and feasibility of the
loan includes what are the terms and conditions of availing the loan. This also means that on
what terms and conditions of the banks and Financial Institutions individual can get a loan for
buying the house (Zhu, Pryce and Brown, 2019). In case terms and conditions of getting the loan
for buying the house is easy and individual can avail the loan for buying the house in such
situation individual will buy the house and increase the demand for the house subsequently
increasing the price of the house. This is because easier will guilty of loan include that individual
can pay back the loan on easy and affordable terms and this means that they will by the house
rather than renting the house on mortgage in the house. This is one of the reasons that demand
will increase and will lead to increase in the price. On the other hand in case loan cannot be
availed by a person because of strict rules and regulations and high interest rate individual will
select an option for renting the house and will increase the renting cost but price of the house will
not get affected. Rate of interest also play important role interested increased overall price for
which individual is buying the house and low interest rate and affordable rate of interest will
increase individual to buy the house. Similarly higher rate of the interest will discourage
individual to buy the house and select the option for renting the house.
3. How has government action over the period 2009-2019 affected the UK Housing market?
Government plays active role in affecting the price of the house and doing so and
affecting the price of houses in UK its government also play significantly and active role
(Chinloy, Cho and Song, 2018). Some of the areas where government can and do directly affect
and impact are interest rate, supply of the house and house price inflation.

Affordable interest rates will lower the price of the houses in UK and this is one of the
major decisions and determinant affecting regarding buying the house and this is affected by the
decision of the government. Government intervene in determining interest rates and this will
influence decision of housing purchase. Lower rates of interest will attract to demand and people
will be able to buy the house and on the contrary when price of the house is high this will reduce
the demand because average price at which individual is buying the house gets increased. This
also includes policies regarding availing low and this is another area which is affected by the
decisions of the government. Policies when are friendly that people can avail the loan on easy
terms they will get the loan and buy the house but on the other hand strict policies of the
government regarding loan and its payback will discourage individuals to get the loan and this
will affect the decision of buying the house (Bilotkach and et.al., 2017).
Other than another area in which government actively intervene is supply of the houses and
supply adequate and more than demand will make positive impact on the buyers in form of
reduced price of the buyers and will encourage people to buy the house.
4. Predict what would be the impact of COVID-19 on UK Housing Market?
Covid-19 which has affected all the areas of economy has affected the housing market of
UK as well. There are several ways in which the impact can be described as most importantly it
is due to economic slowdown which has affected everyone. This impact can be reversed as
positive and favourable impact on the economy affects everyone and contribute in their increased
spending and followed by this again economy receives the money and cycle of growth and
economical strength keeps going (Chernenko and Ya, 2019). Similarly due to Covid-19 this
cycle has reversed because in Covid-19 many economic completely stopped whereas some
economic activities partially continued and this negatively affected economic condition of the
people. This also affect their capacity and strength for spending and because buying house is a
big deal because of significant investment required for buying the house. Many of the people do
this by saving money and many times investment also requires to take loan which they are able
to pay in a fixed time. Due to Covid-19 savings of the people has negatively affected and
capacity of taking loan and paying back has also affected negatively. This suggests that impact of
Covid-19 on housing industry of UK is unfavourable due to unfavourable and negative impact

which has been made by the pandemic on economic condition of the people who invest in the
market (Sivitanides, 2018). Another aspect of the impact of Covid-19 on housing market is that
because of Covid-19 and subsequently followed lockdown also stopped construction activities
and this is also one of the reasons that housing market of UK will get negatively affected by the
impact of Covid-19 pandemic. This is because even when economic condition during and after
Covid-19 pandemic is favourable they will not be able to buy the house because of stopped
construction and lockdown. The fear of spreading the pandemic is also important factor to
negatively affect the housing industry in which people are looking to stay where they are and not
make any unnecessary move. In such situation those who are able to manage without new house
will not make move to do so. People are also looking for economic stabilisation so that they can
make secure and safe investment. In this pandemic jobs and income source of people has also
been negatively affected and this also becomes a important reason that people does not invest in
buying house and meet their other and important priorities before buying house.
Every element related to economic impact during and after Covid-19 suggests that
housing industry of UK is likely to get negatively affected by the impact of pandemic (Adams,
2020). This includes elements like lockdown and stopped construction, income generation and
sources of income of people and individual measures in which people are saving themselves
from the spread of pandemic. Housing industry will also get more negatively affected where
pandemic has made more significant and considerable impact. This is because people will
consider staying away from such places. In this various major cities of the UK has affected
where housing market was strong and this strengthen the negative impact.
But this impact will get reduced once impact of pandemic gets slowed down and life again gets
back to normal. This will followed by again improving business and economic condition of the
people and government will also play significant role in doing so. This impact can also be
reduced with the help of organisations such as banks and financial institution in which they can
help people by allowing feasibility in taking loans and payback of the loans (Nicola and et.al.,
2020). This can also be improved by promoting housing market in the area where impact on
pandemic is less considerable and where life has not affected significantly like other places.

This situation can be positively dealt as price of houses has decreased and this might
make positive impact on the buying decision of the people and increase in demand will again
increase the price and will make positive impact the housing market.
CONCLUSION
On the basis of the above discussion it can be concluded that UK house market has
experienced several changes from increasing the price to falling back again and then significant
increase. The increase in the price get interrupted in 2019 and average increase rate reduced.
There are several reasons which affect the changes in price of houses and these reasons are
demand and supply, cost of house and some more reasons. In determination of the price of
houses government also play important role and their role includes determination of interest
rates, supply decision. Later this report also included discussion regarding impact that COvid-10
can have on the housing market of UK. The pandemic has affected all areas of economy and life
as well and housing market will also get affected by this.

REFERENCES
Books and Journals
Adams, P., 2020. UK Housing Market Expected to Make Modest Gains in Next Six
Years. Energy.
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closures: What are the implications?.
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market.
Begiazi, K. and Katsiampa, P., 2019. Modelling UK house prices with structural breaks and
conditional variance analysis. The Journal of Real Estate Finance and
Economics. 58(2). pp.290-309.
Bilotkach, V and et.al., 2017. The effect of house prices on the long-term care market: Evidence
from England.
Chernenko, V. and Ya, S., 2019. INNOVATION APPROACH TO ONLINE FORECASTING
THE DYNAMICS OF HOUSE PRICES IN UKRAINE. Norwegian Journal of
Development of the International Science. (29-2).
Chinloy, P., Cho, M. and Song, I., 2018. House rent-price ratios: An international
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shocks to the housing market. Journal of European Real Estate Research.
Munro, M., 2018. House price inflation in the news: a critical discourse analysis of newspaper
coverage in the UK. Housing Studies. 33(7). pp.1085-1105.
Nicola, M and et.al., 2020. The socio-economic implications of the coronavirus and COVID-19
pandemic: a review. International Journal of Surgery.
Sivitanides, P.S., 2018. Macroeconomic drivers of London house prices. Journal of Property
Investment & Finance.
Subramaniam, P., 2020. UK House Price Growth Continues to Slow Down. Energy.
Wu, Y. and Lux, N., 2018. UK house prices: Bubbles or market efficiency? evidence from
regional analysis. Journal of Risk and Financial Management. 11(3). p.54.
Zhu, J., Pryce, G. and Brown, S., 2019. Immigration and house prices under various labour
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Online
Average house price in the United Kingdom (UK) from January 2007 to February 2020 (in
GBP). 2020. [Online]. Available Through: <
https://www.statista.com/statistics/751605/average-house-price-in-the-uk/>.