Evaluating Internal and External Business Environment

This report evaluates the internal and external business environment and its impact on the UK housing market. It discusses the changes in average house prices from 2009 to 2019, the economic determinants of these changes, government actions related to the housing market, and the impact of COVID-19. The study provides insights into the factors affecting the success and sustainability of businesses in the housing market.

EVALUATING INTERNAL AND
EXTERNAL BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
1- Average house prices in United Kingdom changes over period from 2009 to 2019...............3
2- Economic determinants of changes.........................................................................................5
3- Government action or decision related to UK housing market over period 2009- 2019.........7
4. Impact of COVID – 19 over the UK Housing Market.............................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Internal environment is business specific and includes workers, resources, owners,
materials etc. and external environment is further distinguish into two elements macro & micro.
Internal and external environment of business includes some factors that affect on success,
growth, profitability, productivity and sustainability. By evaluating both environments in context
of business, management identifies different forces and analyzes company’s strength as well as
weakness which they need to overcome in effective manner. The current study is based on
United Kingdom housing market. Housing market refers to supply & demand for houses, usually
in specific nation or region such as UK. Key component of this area is average house prices and
trend within it.
This report will explain how average house prices have in nation changed over period
from 2009 to 2019. It will justify economic determinants of changes and government action over
period 2009-2019 impacted housing market in UK. Furthermore, it will clarify COVID 19
impact on nation housing market.
TASK
1- Average house prices in United Kingdom changes over period from 2009 to 2019
2009 and 2010 were weakest year for house prices growth, house prices rose by 33 %
during 2010 while 1990s consider average property enhance in value by 21% accordant to data
gathered from nationwide (Mulheirn, 2019). Starting of 2009, see lowest prices for houses in
nation with an average of 157.2 thousand British pounds. Since 2013, average house cost has
been maximizing on an almost monthly basis. In 2019, average prices of house in UK were
230.300 £. The highest house price alter it was considered between 2013 and 2014 when home
prices grew with almost 9%. Unsurprisingly, London was recognized as top performer of past ten
years with house prices increasing twice as quick as country average. Building or housing
society examined house prices over previous four year, comparing differences of housing
metrics. Decade modify in house prices are based on house prices at end of each year utilizing
nationwide regional all properties ranges. As of 2019 July, housing or residential property prices
in UK saw their lowest annual sales since 2012. Average price of home in nation increased by

1.1% in 12 months previous to July, reaching an estimated value of roughly 216000 £ in further
quarter of 2019. It analyzed that house prices in London have fall at their highest pace since
financial crash a year ago as capital bears brunt of nationwide torpor in land market. Accordant
to current official image of market from office for national statistics amid a dearth of potential
consumers, cost of house in country was 4.4 percent lower in May more than year earlier.
Office for national statistics thought that it was the biggest fall in London house prices
7.0 percent annual drop recorded in 2009 August. A year that considered near melts down of
international banking system in close of the year of 2008. ONS assumed that latest easing of
property inflation was only the biggest phase of 3 year downward trend from current said of 8%
in the 2016. Cost had surged in run up to 2015 election next initiatives from Bank of England
and treasury to increase activity. Although a prolonged ear of change low interest rates, costs in
London have been impacted by a varied of factors that highly affects. It includes difficulty first
period customers have in reasonable prices that are still relaxed the uppermost in nation and
reluctance to take on wide ticket things of expenditures when year of Brexit uncertainty. The UK
house prices peaked in 2018 August at 232,000 British pounds.
Figure 1Annual House cost rates of change, year to May 2019
(Source: London house prices fall at fastest rate in 10 years, 2019)
Across UK as overall, resident price inflation dipped from 1.5 percent in April month to
1.2 percent in May, with maximum regional progress considered in North West and west

Midlands. Furthermore, it identified that house prices in UK keep going up because economy is
doing good and individual are in work and salaries are higher. House prices also tend to increase
when more person are capable to borrow money to buy a comfortable houses for themselves as
well as their family.
2- Economic determinants of changes
Disposable Income rate-
It is one of economic determinants that highly affect on housing prices in UK; it is a
alternative of affordability in housing stock (Spiroska and Broman, 2020). Real house costs are
completely interrelated with disposable income because high income means high demand of
houses, then drop of stock will lead to maximize of house prices. It can be said that rising
incomes allow individual to spend more on purchasing a home. Usually, there was a mortgage
ration of three period salaries. Basically when people earn 20 thousand British pounds building
society can lead 60, thousand pounds. Therefore, rising or increasing income of local people
enables house cost to rise. When economy goes into unemployment and recession rises, demand
and supply for buying houses can fall effectively. With good income source people is able to
purchase a good house according to their needs, but it affect negatively when economic crisis
affects on income rate (Mulheirn, 2019). This is one of the biggest reasons due to which the
prices of houses are rise or decrease. Disposable income is defined as money that a local people
in UK has left over to spend as they wishes after all of their required expenses have been paid.
Median household disposable income in country was £ 29,600 in financial year close, 2019,
based on estimate from ONS’s food survey and living costs. Household saving rate in nation
increased to 6.20% in fourth quarter of 2019 from 5.20% in third quarter in same year.
Money supply-
Significant impact on house prices on overall economy in UK through determinants such
as money supply. Nominal interest rate is economic determinant or macroeconomic meter which
contains data of economic situations and investment chances in the future (Tsai, 2020). Monetary
determinants including credit and money supply have different directional connection with house
prices in previous research. Money supply can affect house prices in short term period since it is
money supply shocks identified nominal prices of house. In terms of credit, not only credit
market but also money supply that ascend home prices in different way. It link between house

prices, economic activity, private credit and monetary variables. Money supply increased
continuously and indicated a slower progress after 1990s. It put negative impact on house prices
which in return increase cost. When houses supply cannot match up with increase of demand
then prices will in goes up. It can impact both supply and demand side of houses, residuals
indicate that nation housing market has certain buddle specifically after 2009 because prices of
houses were significantly deviated from equilibrium connections. This economic determinant
shocks have essential dynamic impact on total housing market variables and aggregate prices,
interest rate and output and that these impact are common not sensitive to determination scheme.
Money supply is determined empirically from vector auto regression utilizing restrictions that is
consistent with high class of theoretical concept. It have actual impact on housing market both
housing sales and real housing costs rise in short term period in response to positive shocks to
determinant.
Interest rate-
It put vital impact on house prices, four forms of interest rate have been identified such as
real interest rate, Treasury bill rate, long term interest rate and mortgage rate. Treasury bill rate
as nominal short term interest rate it has out strong negative connection between nominal short
term interest rate and term spread (Li, 2019). Actual house prices are negatively connected to
real interest rate in United Kingdom. It represents cost of financing investment as well as supply
& demand of houses can be depressed when interest rate is high. Bank of England raises UK
interest rates which direct impact on housing prices as well as overall market in negative manner.
It restricts people to purchase house and create biggest challenges for goes up by quarter of
percent level from 0.5% to 0.75 percent maximum degree since 2009. It can be said that interest
rate play dual role in housing market in UK. Bank of England highly impact on house prices
through setting important interest rate in Europe. Higher interest rate are, increase cost of
borrowing to pay for a home is and more people are unable to afford to buy or borrow to
purchase a house. It can also mean prices will tend to be higher. There are varied economic
determinants accessible in market that put negative or positive impact on housing market and put
pressure to change costs according to the situation. Lending banks are seeking to cater more
individual can purchase a prices and house will rise.
Demand and supply for Housing -

Economic determination of prices in regional and local housing markets is the best
example of microeconomics (Payne, 2020). It analyzed that housing market in UK depends on
price that vendor is eager to agree for their personal property with prospective consumers, actual
price that customers is willing and capable to pay. Number of buyers place order for a property
that provider can either accept or reject. When supply of houses were increased then houses
prices can fall. Along with all above economic determinants or factors, law of supply & demand
identifies balance prices of houses or prosperities. It acts against one another until point at which
property stability prices is reached. When a weak economy and oversupply of houses lead to no
demand or low for housing, prices of home tends to fall. So, it can be said that demand & supply
plays vital role for changes over period from 2009 to 2019 regarding house prices. Theory of
supply and demand is one of the basic principles in economics. Lower prices drive needs which
means buyers purchase and value something more when it is cheaper. Then when it moves to
supply law prices fall when there is a raise in supply of houses or housing market services. This
industry heavily relied on supply & demand that is why it is quite prominent in housing market.
Low supply may be moves prices up which are what tend to occur with bidding wars.
3- Government action or decision related to UK housing market over period 2009- 2019
Housing market in United Kingdom is at weakest point when global financial crisis a
decade ago. House prices increased across nation has been softening since middle of 2016, costs
in London falls since middle of previous year, while prices in Wales, Northern Ireland and
Scotland are reflecting certain resilience. In order to handle overall situation government take
significance action that directly impact on housing market of UK (Crick, Jenkins and Surminski,
2018). They create effective policy that change whole environment. Their initiatives to consider
all factors and solve them such as help to purchase equality loans, have primarily increased
demand more than expanded supply. National audit office report shows that over than 60 % of
those who have utilized help to buy scheme can have buy a property regardless and half of their
team can have purchase their desired house without help to scheme, recommending that current
policy is not being embattled as efficiently as it may be. British houses price in 2009 has first to
their annual fall since at least 2002. House costs in London really faced worse prices down 5.3
percent. It perhaps one of the popular problems of discussions in nation. Economies situation in
2009 is defined as worst financial crisis. Credit crunch, unemployment and business led
economy into prolonged recession. It is the accountability of Bank of England and Monetary

policy committee to set interest rates in United Kingdom. Government sets MPC as inflation
target of CPI=2 percent -\+. It goals to keep inflation as close to their target market as possible.
When inflation is below or above this degree, governor of Bank has to write a official letter of
explanation to chancellor. They only target inflation; though in acts they may consider impact of
interest rate modification on unemployment, economic growth and to a lower impact exchange
rate and extent housing market rate.
Government is in way attempting to prevent house prices declining by bailing out banks
and supporting them to lend for example RBS, northern rock etc. Monetary policy committee is
effectively cutting interest rates to make borrowing cheaper for consumers. Authority is putting
high pressure on Banks of England to pass these rates decrease on. Increased spending and
reduction in VAT can limit level of recession which is quite beneficial for local people in term of
enhance their ability to purchase a house or borrow it from sellers (Borio and Hofmann, 2017).
Government fined better policies to handle this situation or to prevent a repeat of bust and boost
experience twice in past 10 years. By reducing interest rates, England Banks allow people to buy
houses; it is the right and appropriate action that the government takes to reduce every bad effect
on housing market. Houses prices are possible to modify with respect to region; England is most
probably going to consider a relative raise in prices as other field may not see such as effective
coefficient of progress in prices.
To get better economic position and overcome issue government can compel taxes &
decrease expenditures. Due to low interest rate, ability and affordability of houses has improved,
it can help in lifting demand. At same period reluctant home owners have not put their own
properties on ladder, leading to fall in supply for home. Furthermore, government can cater
subsidies for housing developments to enhance supply of housing in place where there is intense
demand. By increasing supply they seek to decrease prices of houses rather than before in
effective manner (Bikker and Vervliet, 2018). Government encourages and motivates people to
purchase their own houses and financial firms such as Banks are accountable for creating
favorable economic environment to increase lending such as Nationwide the biggest building
society in United Kingdom.

4. Impact of COVID – 19 over the UK Housing Market
For speculating the effects of COVID 19 over the UK housing market it is essential to
understand the analytical view of housing market and what are the forces causing them change.
Extreme uncertainty related with impact & evolution of pandemic every sector of the economy
has suffered a hit whether directly or indirectly. Housing market of UK has gone down into a
freeze due to the measures adopted for COVID 19 spread. British people in middle of purchasing
house could move their property but the viewings and offices of estate agents are closed to public
due to measures of COVID 19. Housing activity and prices are picking up from start of year
2020 which has helped in reducing the impact of BREXIT & political uncertainty. Trend has
gone completely reverse with the COVID.
It has made the housing market to stand still. The scenario is same in most of the major
economies of the world. The spread of housing market will put a halt to the supply of houses in
the market. The housing market will suffer a heavy decline for the coming years. The revival of
housing market was made possible after the increased efforts and strategies of government to
increase the demands and supply of residential houses in UK. Spread of COVID has affected the
economy of every country (Cook and Watson, 2016). Due to the spread of COVID all the
revenue generating sectors have remained shut for months that has affected the rotation of money
in the economy. Due to the loss of business revenues and income generating services major part
of the economy has suffered signifiant decline. Saving s of the people have been used in the lock
down period. Shut down has made income loss affecting the purchasing power of people and
corporations to invest in the properties. Due to this housing market will suffer heavy decline in
the the demand as people are having the funds to invest in property markets. Expansion and
investment plans of the companies and firms have been put to halt till the time they have reached
and managed the required funds for investments. At the global level investors from foreign
market are not allowed to visit the country due to the pandemic.
It is expected that the international travel will remain closed for coming six to eight
months. After coming out of the freeze stage housing market will suffer a very slow growth as it
will take time to boost their efficiency and production (Best and Kleven, 2018). Banks and
institutes will make strict regulations for loans over housing market due to slow growth of
economy. The impact is high over the residential housing market and it could take around 2

years to come back to the growth rate as of before lock-down. The demands for housing market
will take considerable time to return back to normal.
CONCLUSION
From above analysis it has been concluded that in UK house prices were changed due to
some economic determinants and specific factors over period from 2009 to 2019. Interest rate,
money supply, demand & supply for housing and disposable income rate are considered as
economic determinants that affect in positive or negative manner it is demand on situation of
economy. Due to increasing houses prices, people or buyers were seeing a lot of difficulty in
buying a house, but the decision taken for the government gave them a lot of relief. The new
scheme of authority and decision for reducing interest rates they can encourage local people in
ethical manner. It put positive impact on economic environment and reduces stress over
individual who seek to purchase house at affordable price. Furthermore, this study summarized
that COVID 19 is one of the biggest factors that impact on housing market and houses prices
negatively, but with the help of appropriate and effective plans as mentioned above government
overcome situation effectively.

REFERENCES
Book and Journals
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rates. International Journal of Finance & Economics. 23(1). pp.3-18.
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persistently low?.
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Spiroska, E. and Broman, D., 2020. Entrepreneur or Fool: A comparative study of the housing
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Tsai, I.C., 2020. Market Integration and Volatility Transmission in England’s Housing
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Online
London house prices fall at fastest rate in 10 years, 2019. [Online]. Available through: <
https://www.theguardian.com/money/2019/jul/17/london-house-prices-fall-at-fastest-rate-
in-10-years-ons>