Factors Influencing Price of Rental Housing in UK

Economics For Business

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Factors which influence the price of private rental housing in UK........................................1
TASK 2............................................................................................................................................7
Governmental or economic policies used to influence demand for private rental housing in
UK..........................................................................................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
For examining the various factors that influences demand and supply of a particular
commodity in a specific area, economic theories can be used. This covers a number of issues
through which concepts like financial crises, fluctuations in production cost and more, easily be
analysed systematically. The present report covers key points which influences price of rental
housing in UK. To support this concept, law of supply and demand curves are utilised, which
help in exploring main determinants, including governmental policies used for stimulating price
of rental housing. This paper also looks at the level of house prices of UK from an economic
perspective, including fundamental processes which drive the market to take or provide homes
on rent on affordable prices.
TASK 1
Factors which influence the price of private rental housing in UK
Through economical perspectives, prices of houses in equilibrium are generally set by
balance of supply and demand. However, if, supply persistently fails for responding towards
higher prices of homes, or if prices drive by factors which are different from fundamental needs
for housing, then under such conditions, prices of houses are potentially hike and unaffordable
for buyers. This would upward pressure on cost and wages of doing business, as well as increase
risks on stability of macroeconomics. Therefore, people under such conditions, instead of buy
house seek to take on rents, in order to meet their basic needs of shelter. Affordability of housing
in economic terms, defines as relationship between ability of buyers to pay and market-
determined costs of housing. Along with this, such concept not usually relate with ‘affordable
homes’, i.e. social rented and intermediate housing, which are provided to some eligible
households, needs of whose are not met via certain market. Furthermore, even at condition of
equilibrium, prices of specified housed will be beyond the budget, leaving some who are not able
to pay where they are unable to access ownership of home. In social terms, lack of affordability,
also has perverse effects on living cost by pushing up the rents. Furthermore, unaffordability to
buy house also leads to increase demand of rental housing, where, as per law of supply and
demand, it increases price of same also. In this regard, UK which is one of the overcrowded
nation of European, housing challenge is considered as enormous and thereby, needs to take
adequate attention, for meeting demand of people to meet their basic necessity of shelter. House
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