Factors Affecting Private Rental Housing in the UK

Economics for
Business

Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Demand and supply analysis to determine factors affecting private rental housing in the UK
................................................................................................................................................1
TASK 2............................................................................................................................................5
Governmental and economic policy that formulated to influence the demand for private rental
housing in the UK...................................................................................................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Economics is the study of mankind in the ordinary business of life. It is a huge concept
which defines relation among resource utilisation and production made. Economics when applied
to businesses helps to analyse the market by establishing a relationship among demand and
supply of various goods and services (Moran, 2012). There are number of economic factors
available in the business environment that affects businesses for using various resources.
Business sector in the economy is one of the important in order to govern the whole economy.
In this project report business economics will be analysed in order to present effective
utilisation of resources. The concept of demand and supply is analysed for the private rental
housing in UK. Analysis of various factors and policies will be made to analyse how they
influence demand and supply of rental housing in UK. All these analyses will be represented
through graphical representation.
TASK 1
Demand and supply analysis to determine factors affecting private rental housing in the UK
In an economy business sector is all directed and governed thorough the concept of
demand and supply. There are number of predictions are made in order to access future demand
and supply. There are number of factors that affects demand and supply in the market and these
are considered for analysing future market condition. There are certain laws and theories are
developed in order to analyse and trend of demand and supply in the market. Detailed discussion
of demand and supply concept to analyse factors affecting private rental housing in UK is as
follows-
The concept of demand computation is introduced in the name of “law of demand”. This
helps to analysing or evaluating consumers spending on different goods and services available in
the economy of UK. The law of demand by keeping all the factors constant defines a relationship
among price and quantity demanded in relation to each other (Thanh and Duong, 2011). As per
this law a clear vision is provided which determines the changes that quantity demanded faces
due to change made in the prices of the good offered in the market. As per this law price and
demand possess an inverse relationship with each other i.e. when price of goods will increase
then it will result in decrease in the demand. This concept will be applied on the private rental
1

housing sector in UK to determine how demand is affected through pricing effect. Graphical
representation of the law of demand is as follows-
(Source: Demand Curve, 2020)
This demand curve defines that when price of the housing at rent in UK was at P1 then
demand was at Q1. A decline in price is recorded and price reaches to Q2 then demand for rental
houses increases to Q2. These changes keep on taking place with change in pricing in the
industry. Price of a good is not the single factor that affects demand. There are number of factors
which affects pricing of rental housing in UK which leads to create a negative and positive effect
on demand for housing at rent. Some of these factors are as follows-
Affordability: It means that individuals become capable to spend the amount required to
purchase a house. When prices of houses decrease in economy they become affordable for more
and more users and demand for the private rental housing facilities decreases (Anwar and
Nguyen, 2011). As more and more people will shift towards purchasing their own house rather
than ranting. When an economy is at growing stage then demand for housing facilities increases
and availability of housing at lower rate will shift demand towards purchase of the housing.
Disposable Income: It is termed as the amount of income available with the individual
after payment of all the taxes. Availability of high amount of disposable income leads to
generation of more and more demand for housing (Tria Kerkvliet, 2017). People tends to
purchase a house property when made available with more amount of disposable income. So,
when more disposable income will be available with individuals then demand of rental housing
property will reduce and vies-versa.
2
Illustration 1: Demand Curve, 2020