Economics

Economics

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Describing the main factor that causing the price of private housing in UK...............................1
TASK 2............................................................................................................................................7
Explaining the main government and economic policies which stimulate the demand for
private housing in UK..................................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business economics is that field which is mainly applied in the economic theory by using
quantitative methods so that it will analyse the business environment. Further, it also describe the
factors that are also contribute the relationship of a company, labour, capital as well as product
markets (Castells, 2017). In the same way, current study will also describe the deep
understanding of demand and supply curves in which it describe the main factor that determining
the price of private house in UK by using special demand and supply graph. Further, study will
also determine the main government as well as economic policies which is mainly used to
stimulate the demand of private houses.
TASK 1
Describing the main factor that causing the price of private housing in UK
Housing in UK presents the largest non- financial assets class in UK and it is analysed
that around 30% of the owned by the people and further 40% of the homes are mortgage. But
due to increases prices in UK may affect the housing crisis for some especially for low income
brackets. Therefore, there are some factor that affect the overall private housing in UK and these
are as mention below:
Interest Rate: It is effect the overall private lodging market in opposite way such that
lower interest leads to lower down the mortgage rates which is offered from bank and as a result,
it decreases the monthly mortgage payment which homebuyer should pay for a specific mortgage
amount. It is such that smaller the monthly payment, it will be more affordable to take a loan
(Charles, 2016). As a result, the demand will increases because people may easily get loan in
low rates if the interest rates of loan is low. Moreover, changes in the interest rate large causing a
person's power to influence houses because of getting loan in such a low rates.
On the other side, as interest rates rises, mortgage also raise and as a result, the demand is
decreases. Further, the mortgage will remain cheap and there will be increase in wages which
will also feel as a burden (Factor that affect the housing property in UK, 2018). The main reason
of lower down the interest rate is low inflation environment which increases the competition and
there is a decrease in edge between policy interest rate and lodging debt charge.
Stamp Duty: As per the secondary research, when stamp duty drawn-out down the
lodging market in UK. Such that there is a decrease in rate of quality such that when the belief of
houses transcend £250000 and there is an alteration in levy charge from 1 to 3 percent (Gibb,
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2016). As a result, if there is 2 percent point increase in stamp duty then it will reduce the
household mobility up to 40%. it is also analysed that due to imposing stamp duty, the
households and the market of private house decreases and it will creates a significant welfare
loss on society as a whole. Therefore, the welfare loss link with tax rate also raise from 1 to 3%
which means that there is possible above 80% of the revenue increases.
In past time, Philip also get rid of stamp duty for all the holding up to 3 lack pound with
an direct result in fund. But the office of Budget Responsibility predicts which will raise price
by 0.3 percent. Therefore, the transfer tax on property creates negative impact such that by
increased moving cost of unemployed may take up jobs from their residence from switching to
more productive jobs. Therefore, it affect the overall housing market of UK.
As per the above graph, it is interpreted that S4 is the existing supply but when price
increases the supply decreases and as a result, quantity also affected.
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