Impact of Economic Determinants and Government Actions on UK Housing Prices

This report analyzes the impact of economic determinants and government actions on the housing prices in the UK. It discusses the change in average prices of housing property over a decade, economic determinants affecting the housing market, and government actions influencing housing prices. The report also examines the impact of COVID-19 on the UK housing market.

Contemporary Business
Environment

Table of Contents
INTRODUCTION.................................................................................................................................3
MAIN BODY........................................................................................................................................3
1. Change in average prices of housing property changed in a decade..........................................3
2. Economic determinants of the changes in the Housing market......................................................4
3.Government actions affected the housing prices.............................................................................6
4. Impact of COVID-19 on UK housing market................................................................................8
CONCLUSION.....................................................................................................................................9
REFERENCES....................................................................................................................................11

INTRODUCTION
Business environment comprises with various factor and elements create impact over
the business of company. Business environment involve various internal and external factors
put an impact over the business of company. In this report average housing prices in UK will
be discussed. How different economic determinants create impact over the housing prices
will also analyse in this report. All the government actions that have created impact over the
housing pricing will also evaluate in this report. Furthermore, this report will also analysis
about the impacts COVID 19 crisis have created over the housing prices in UK.
MAIN BODY
1. Change in average prices of housing property changed in a decade
(Emerole, 2018)
The above chart have projected all the figures that portrait about how the property
price in UK have fluctuated over the past 10 years. 2019 is the year when the average housing
prices in United Kingdom have reached to 21200 marks in comparing to 14992.05 marks of
2010. 2019 is the year that has denoted the maximum average housing prices in UK due to
demands and many other factors (Crosby, Devaney, Lizieri and McAllister, 2018). The above
chart project that average housing prices in UK have always registered the increasing trends
just like any other investment commodity in UK. The average property prices in 2011 have
reached to 15542.58 marks that has further increased to 16197.01 mark in the year 2012.
2013 is the year when the average prices of UK housing market have reached to 16784.85
mark and that is further increased to 17521.75 in year 2014. 2015 was the year when the
average housing prices have reached to 18219.3 mark that is also expanded to 18707.19 in

the year 2016. 2017 was the year when the average housing prices in United Kingdom have
registered at the rate of 19485.39 which also further increased to 20544.34 in the year 2018.
In th year 2019 the average prices have achieved the 21200 mark which is the most of all
time. In the year 2020 the average prices of housing property have decreased. This reduction
in average housing prices of property can be seen due to pandemic like Corona Virus spread
in UK. This can be projected that except the year 2020 the average housing prices in UK have
always entertained a significant increase in the rate due to various reasons like increasing
demands of property in UK. Many reasons can be spotted like per capita income of peoples
based in United Kingdom has always increased potentially. Per capita income of people in
society plays a major role behind deciding the prices in market. The income of people also
reflects the demand in market. Due to constant hike in per capita income of people in UK the
demands of housing properties in UK have always been high. In the year 2020 the average
housing prices has reduced due to less demand of property in UK. People were lacking in
financial resources due to stoppage of earning as a result of lockdown. This can be projected
that earning capacity always influences the spending of people. This is the demand low of
economic if the income of people is low the demand will low and if the income of people in
raising the demand will also increase in market. The low have also implemented in the real
estate market of UK which have also reflected in the year 2020 when the property prices have
reduced in UK.
2. Economic determinants of the changes in the Housing market
Economic determinants are the socio economical factors like family, neighbourhood
financial position, society and cultural ingredients that influence the product demand. All
these factors play a crucial role in generating product demands in market. Economical
determinants involve aspects like per capita income of people in UK, interest rate,
unemployment rate, manufacturing cost, supply of material and various other elements that
create an impact over the property prices (Fabozzi and Xiao, 2017). The purchasing capacity
of people based in UK play a huge role for affecting the demand and supply of the housing
properties. Availability of financial resources also play a crucial role as in most of the cases
housing properties are procured with the support of loan like housing loan in most of the
cases. Interest rate on the housing loan also creates potential impact over the demand in the
market. Different factors part of the economic determinants that influence the demand of
housing properties in UK will be projected in the following points.

Per capita income: This is among the major Economic determinants that influence the
demand in market. Over the period of time in last 10 years the per capita income of people in
UK has significantly increased due to economic development of country. This increased per
capital income of people in UK have also raised the property demand in UK. Property market
especially the housing product is among the key investment option for people (Gokmenoglu
and Hesami, 2019). This is not necessary that housing properties are purchased with the aim
of staying in the property. Most of the individuals carry the high income invest in housing
properties to generate effective revenue out of the investment within few years of investment.
Over the last 10 years due to increase in per capita income based in UK the demand of the
housing property have also constantly increased.
(Cook and Watson, 2016)
Economic growth of country: Economic growth of country also put a huge impact over the
demand and supply of housing property in UK. This is another potential factor create impact
over the property demand. Economic growth also creates a positive impact over the per capita
income in the country (Hanisch, 2018). Due to immense economic growth in past 10 years
the per capita income of people based in UK have also witnessed a significant rise on a
constant basis. This increased economic growth have increased the demand of housing

properties in UK not just for the staying purpose but along with people in UK have looked
housing properties as an investment option. Income of people always reflects in the demand
if the income is gaining a significant hike than demand will also gain a significant hike in
market.
Construction prices: Construction price is always a crucial part of the housing property
demand in market. In case of housing property the construction requires different factors and
commodities like cement, steel and many other types of equipment. The individual prices of
all the commodities part of the construction process would reflect in the overall prices of
construction work in case of housing property (Haynes, Nunnington and Eccles, 2017). The
expected construction price also reflects in the demand in market. If it is out of the budget of
the people based on the per capita income than the demand would be low i market. Over the
last 10 years the income of people have also increased that has also given scope to the people
based in UK to afford the housing properties even at the high prices.
(Antonakakis and Floros, 2016)
Interest rate: Interest rate is among the major factor that influences the demand in housing
market. This is another Economic determinants impact over the demand of different housing

properties in UK. Most of the times the buyers of the property take housing loan to get the
proper funds to buy the property. The changes in interest rate also impact over the property
demand and trade (Higgins, Vincent and Wood, 2020). For example in the year 2013 the
interest on housing loan have significantly increased in UK that has created a negative impact
over the property demands.
Number of suppliers: This is another potential factor impact over the property transactions
in UK. Number of suppliers of material involve in construction work. If the total number of
suppliers in the market is huge than it will reduce the overall construction cost of the
property. This factor also influence the demand in market as it directly creates impact over
the construction cost in UK.
Mortgage availability: Mortgage is a key facility associated with the housing market. In
between the year of 2009 to 2014 the UK’s housing market has entertained a huge property
demand due to banking initiatives to give potential funds in the name of mortgage loans.
Banks from the front have encouraged the people to take funds from the banks to meet up the
property requirements. This has created a positive impact over the demand ion property
market of UK. Funds always a major concern every time an individual is looking for an
investment in housing property. This initiative has increased te capabilities of all individuals
in order to generate funds for buying housing properties.
Increased demand: Over the past 10 years the real estate market in UK has gained a
constant increase in demand. Due to increased trend of income in UK the demand of housing
sector have witnessed a constant hike in past 10 years. The supply was restricted which have
also increased the prices of different housing products in UK. This is the low of economics in
case the supply is limited and demand is high it will increase the price.
The above mentioned points are the key Economic determinants create impact over
the housing property demand in UK. All these factors create a potential impact over the
housing market. Demand always a factor that reflected the financial resources availability in
market. Economic laws also support the high demand of products in case of high income.
Both the factors directly connected with each other. Relationship between both the factors is
direct.

3.Government actions affected the housing prices
Government actions also influence the demand in market. In United Kingdom
government also put an impact over the retail sector trade. Over the period of time various
actions government has undertaken to influence the real estate sector of UK. All these actions
has allowed government in UK to control the sector.
Taxes and subsidiaries: Government in United Kingdom action in case of dealing in
property. This has created positive impacts over the housing market of United Kingdom.
Under the section 24 of Income Tax Act government has provided these benefits to all
property buyers based in UK (Ivanovych, 2019). Price play a huge role in the demand of
product in market. These amendments in the act have allowed government to control the
property prices in UK at some level. This makes the property even more affordable in UK.
Subsidiary also granted to all the buyers that has further created positive impacts over the
mindset of people in UK. This has supported the government in keeping the property price at
a certain level. It is expected that in case the government would not have supported the
property buyers with the support of this legislation the prices of the property would have
gone to a different level.
Maximum and minimum prices: Government in United Kingdom has framed the
legislation that allowed them to set the rule of minimum and maximum prices of property.
This is a strong legislation applicable in UK to control the property pricing. This is an
important legal application that support the maximum price of property can be charged b the
owner of the property. Minimum price a owner must get against the sale of property is also
claimed in this law (MacGregor, Schulz and Green, 2018). The prices set under this law are
based on the economic growth, per capita income of people in UK and other key financial
factors. Prices are also based on the location of property. On the basis of the demand and
location and other economic factors prices of property is decided in this law. This legal
regulation has allowed government to control the property prices in UK at largest extent. The
property is that commodity that can be projected as the most expensive and most valuable
among all the assets human being can be a part off. This legal regulation has allowed
government to take a control over property trade in UK. Housing property is also consider as
the basic right of human as shelter is also cover under basic need of human. This law has
provided significant advantages to all middle class and lower class economic background
people in society.

(Harding and et.al., 2018)
Regulating the market: Government in United Kingdom has regulated the property market
on a continuous basis. Modification in the property laws has veen conducted over a regular
basis to control the real estate sector. Modification in property act of UK is done based on the
requirements of the market in present time. The modifications allow government to control
the real estate sector in the most controlled manner. In recent time government has
implemented the different modification like tax benefits and subsidiaries, minimum prices
and many other legal regulations have implemented (McAllister and Nanda, 2016). All these
regulations have allowed government to control the entire real estate market precisely. Laws
always create a authority for the government to control the entire sector or market. On the
basis of the requirements of peoples and buying capacities of people in UK all the
modifications are conducted in the legal structure related to real estate market.
State ownership: As per the regulations of United Kingdom the property comes under the
state ownership in the United Kingdom. All the housing properties in UK are belongs to the
state government in UK. State ownership allows government to keep the eye on every
property transaction undertaken in UK (White and Ke, 2019). The real estate market is
among the highly profitable market part of the business environment. Due to immense
profitability in every real; estate deals this sector alow a special interest of government in the
sector. State ownership also supports government in setting up maximum and minimum
prices for every real estate property in UK. This helps in conducting the price valuation of
every property in UK.
All the above regulations and government actions has controlled the price increment
over the real estate market of United Kingdom. House property is among the basic need of
human being. It becomes essential for the humans to have a safe house as it covers the basic

need of human being. Government opposed all these regulation to support the affordable
pricing concepts for the real estate market of United Kingdom (Nzau and Trillo, 2019). Over
the period of time prices of property has increased in United Kingdom but the per capita
income of people in United Kingdom have increased more than the price hike in United
Kingdom over the housing property. All the legal regulation has created a specific control
over the real estate market of UK. The sector is a highly profitable market sector which also
derives special interest of people towards the sector.
4. Impact of COVID-19 on UK housing market
In the last 10 years the real estate market in UK has received a significant hike in the
prices of all the real estate property. In recent time the property market in UK have received
a significant hike due to economic growth. In the year 2020 the pandemic call as COVID 19
have entertained in the real estate sector. This pandemic has heat the market badly. This has
resulted into blockage of income of people. The pandemic have resulted into complete
lockdown situation. The lockdown have resulted into unemployment, income blockage and
various negative impacts over the life of the people in UK. Due to low income the spending
of the people also reached to minimum level. All the people based in UK have started to think
twice or thrice every time when they involve in any kind of expenditure. All the impacts
COVID 19 has created the low demand of property in UK (Ruscheinsky, Lang and Schäfers,
2018). People have stopped the idea to buy any new property in United Kingdom. This
neither has nor just heat over the investment plan of peoples along with the regular buying
decision of property in UK. The demand of the housing property has reduced due to this
pandemic. The low demand of the housing property has resulted into reduced prices of
housing property in United Kingdom.
The pandemic of COVID 19 have affected the market very badly. Many people have
lost the job in marker. Many employees who could sustain the jobs needed to suffer in low
salary. The pandemic has created major mental pressure over the head of people in the job.
The pandemic of COVID 19 has created a long term impact over the real estate sector. Every
calamity leaves behind the impact for long run. This pandemic has heat badly over the
income and economic background of people all across the globe. The real estate market is
more expensive as compare to other business environment sector. Income and demand has a
direct connection as per the laws of economy (Stevens, 2018). Due to reduced income the
demand of the real estate property has also decreased. This pandemic situation has allowed
people to suffer to meet te regular expenses of living. In such a situation to generate the funds

for huge investment in real estate property can be projected as the tough decision for all the
property buyers in United Kingdom. Even the prices has reduced still the growth of the real
estate market have reached to the lowest level in United Kingdom along with the other part of
the world. Global business environment have suffered from the pandemic. Now the things
started to be back on track. The situation has become more convenient. Company have started
to be back on track. Production in industries has initiated to be happen again. Now the people
back on the track. The demand of the property wills emerge in few time. It can be expected
that within few years the real estate market will again receive its growth in market.
CONCLUSION
This report has project different aspects related to real estate market sector in UK.
Real estate market is among the highly competitive market part of the business environment.
Over the past 10 years the prices in real estate market have constantly received a hike in
prices. The demand of the housing property has always been huge in United kingdom due to
effective economic background of people and effective per capita income of people in UK.
Except from the year 2020 the prices have always been increased in real estate sector
especially in housing segment. Various legal regulations of government such as minimum
and maximum prices of property, state ownership and various other legal regulations have
allowed controlling the pricing and real estate transactions in UK. Various factors like high
income, pricing stability and other factors have created an impact over the demand of real
estate property in United Kingdom. Due to COVID 19 Pandemic in the year 2020 the demand
of the real estate sector has reduced.

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