Assessing Problems and Solutions: UK Housing Market Analysis

This report provides a comprehensive analysis of the UK housing market, identifying various market failures such as price instability, geographical immobility, environmental costs, inequality, and incomplete markets. The report delves into the causes of these failures, including economic factors like income and unemployment, and societal issues such as increasing population and limited land availability. It highlights the negative impacts of these failures, including environmental damage, rising inequality, and lack of good quality housing. The report proposes preventive measures, including the use of price mechanisms, legislation and enforcement to control undesirable behaviors, and government intervention to prevent monopoly practices. Furthermore, the report emphasizes the importance of effectual allocation of land for residential, educational, and healthcare purposes. The conclusion reiterates the need for significant actions to develop an efficient housing market, with legislative aspects and effective price mechanisms as key contributors to economic growth and development. This report is a valuable resource for students and researchers interested in understanding the complexities of the UK housing market and its challenges.

Economics and Government

Table of Contents
INTRODUCTION...........................................................................................................................2
Main Body.......................................................................................................................................2
Assessing the problems prevailed in UK housing sector along with the preventive measures...2
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8
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INTRODUCTION
In the present time, there is a slow growth has been identified in the prices of the
property of London. Now, prices of the luxury property also decreased by 30% which is not a
good indicator. Moreover, high increase or decrease which takes places in the price level may
result into highly speculative activities. In this regard, efficient market is highly required for the
attainment of goals and objectives. Thus, this project report will describe the main types of
failure that takes place in UK housing market. Further, it will also shed light on the ways through
which such problems can be mitigated to the large extent.
MAIN BODY
Assessing the problems prevailed in UK housing sector along with the preventive measures
There are several types of market failure which is prevailed in the housing market of
London. Hence, for the economic growth and development it is highly required to take
significant action or measure which may result into efficient market. Types of market failure
includes price instability, geographical immobility, monopoly power, incomplete market,
negative externalities etc. are the main factors which have high level of impact on the growth
aspect. Hence, from several cases economists have identified that all the above mentioned aspect
or factors causes of market failure (Nuuter, Lill and Tupenaite, 2015). Along with this, other
factors which affect the housing market that is such as economic growth. In a economic growth
people only demand for new house if their income is high. On the other hand if their income is
not enough then they cannot afford a new house.
Unemployment also affect the housing demand because if employee have no job then it
cannot afford a new house while it can move to other place for the job purpose and buy house
their in other place. Moreover, price of house is rising and there are many people who have no
job or not enough income to afford a new house (Zhang and et.al., 2016). It shows inequality
between because of high rate. There are many reason that show that increase in house price
inaccessibility of housing is factor of housing income in equality. Population is increasing and
there is no land for the building a house so it affects the environmental cost. Government is
providing a land which is not good area. Further in a area where house is provided there is no
transport facility is available.
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Types of market failure
 Environmental cost: New houses have high level of environment cost which highly
influences the green aspects. Moreover, due to the incline in nuclear family aspects now
aspects of green environment are affected in the negative direction. Now, flats and homes
are constructed on the green land (Albrecht, Gautier and Vroman, 2016). Besides this,
pollution related activities will also increase to the great extent. In this way, such aspects
have high level of impact on the environmental aspects.
 Inequality: The main reason behind the inequality from rising house price is inflationary
aspects. Moreover, when prices of the house increase then rich become richer. Moreover,
prices of land highly vary according to the area and its importance. Thus, it can be said
rising prices are one of the main causes due to this inequality increases to the large
extent.
 Lack of good quality housing: There are various problems that are being faced by lack of
sufficient good quality housing. People face problem in getting a standard living and due
to this stress level rises among individual. Harmony and peace in society gets affected
due to it (De Jong and et.al., 2015). Moreover economic difference is created among
people and they feel problem in getting same level of facilities for their families.
Structure of society gets disturbed when people faces problem in getting appropriate
house for themselves.
 Incomplete market: The main failure in relation to this is that due to housing market may
fail to focus on the development of aspects which are associated with the public needs.
Specifically, education and healthcare are the main two sectors which will be affected in
the negative direction (Market failure in the housing market, 2015). Moreover, when
large number of houses is established to fulfill the demand of people then it may result
into the lower development of educational institution and healthcare sector.
 Price instability: It implies for those which entails that changes take place in the supply
aspect is lower than the price. Hence, supply of housing in inelastic because when
investors think that price will fall then it seems to be stagnant (Healey, 2015). In this
way, price instability is one of the major factors which have high level of impact on the
efficient or effective market.
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 Geographical immobility: Prices of the houses in London are significantly varied from
north to south. In this condition, employees or worker find difficulty in assessing the
suitable place for accommodation in UK (van den Nouwelant and et.al., 2015). Hence,
due to this aspect, companies operated in the highly expensive areas find difficulty in
employing the highly skilled and talent personnel. Thus, it closely influences the growth
and economic development in a negative manner.
 Information failure: Sometimes, one party does not provide full information to another
party regarding the each and every aspect (Heurkens, Adams and Hobma, 2015). Thus, in
the absence of enough or proper information it is not possible for the contractual parties
to make suitable deal.
 Along with this, monopoly is another main factor which influences the efficient housing
market. Moreover, when monopoly is created in the market that it may result into the
abusive business practices or aspects (Phang, 2016). Moreover, monopoly market
increases exploitation of the people in terms of higher prices.
 Further, in the present times, housing market is suffering from the issue that it fails to
exert control on undesirable activities such as manufacturing and selling of alcohol,
cigarettes etc. Such de merit goods have high level of impact on the environment aspect
of the housing area or sector.
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By taking into consideration, all the above mentioned aspects it can be said that housing
market affects macroeconomic aspects to the large extent. Moreover, high level of decrease
which takes place in the price level of property may cause of recession. Hence, to ensure high
level of stability in the market it is required to take preventive actions or measures. This in
turn helps in making improvement in existing condition to existing housing market to the
great extent.
Preventive action or measures
 Use of price mechanism: By practicing the price mechanism aspects efficiency of UK
housing market can be improved. On the basis of this aspect by raising the price through
the means of taxation economist can prevent the harmful effects (Nuuter, Lill and
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Tupenaite, 2015). This in turn helps in changing the attitude and behavior of both
customers and producers.
 Undertake legislation and force: In order to prevent the undesirable behavior of people
UK government needs to form and introduce specific laws and legislation. For instance:
By making restrictions on the cars parking in the city centre behavior of the people can be
controlled (Types of market failure, 2016). Besides this, by making the license system as
mandatory for the producers who sell alcohol, cigarette etc. activities of the producers
can be controlled to the great level. Along with this, by penalizing the producers efficient
market can be created or developed to the significant level.
 Beside this, to make the market more efficient government needs to create fair
environment for the prevention of monopoly practices. The rationale behind this, in the
monopoly market there is the issue of customer exploitation. In this way, economic
growth is hampered to the large extent due to the monopoly practices. Thus, by taking
into consideration such aspects it can be said that by framing the sound strategic
framework monopoly practices can be avoided to the large extent.
 Government also needs to make focus on the effectual allocation of land to all kind of
aspects such as residential, education and healthcare etc. Moreover, growth of the country
is significantly influenced from the level to which educational and care institutions reside
there (Zhang and et.al., 2016). In this way, all such strategic actions or measure will
provide assistance to the government in improving the market condition or factors to the
large extent.
CONCLUSION
From the above report, it has been concluded that there are several deficiencies which
takes place in the housing market of UK. Besides this, it can be inferred that high level of
fluctuation takes place in the UK housing sector. Further, it has been articulated that by resolving
all the issues through the means of significant action or measure efficient housing market can be
developed. Hence, legislative aspects will provide high level of assistance to UK is developing
highly suitable and effectual market. It also has been stated that by introducing the effectual price
mechanism system UK government can make vital contribution in the economic growth and
development.
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REFERENCES
Books and Journals
Albrecht, J., Gautier, P. A. and Vroman, S., 2016. Directed search in the housing market. Review
of Economic Dynamics. 19. pp.218-231.
De Jong, J. P. and et.al., 2015. Market failure in the diffusion of consumer-developed
innovations: Patterns in Finland. Research Policy, 44(10), pp.1856-1865.
Healey, P., 2015. Re-thinking the relations between planning, state and market in unstable
times. Connections: Exploring Contemporary Planning Theory and Practice with Patsy
Healey. p.169.
Heurkens, E., Adams, D. and Hobma, F., 2015. Planners as market actors: the role of local
planning authorities in the UK’s urban regeneration practice. Town Planning Review. 86(6).
pp.625-650.
Nuuter, T., Lill, I. and Tupenaite, L., 2015. Comparison of housing market sustainability in
European countries based on multiple criteria assessment. Land Use Policy. 42. pp.642-651.
Phang, S. Y., 2016. Housing finance systems: market failures and government failures. Springer.
van den Nouwelant, R. and et.al., 2015. Delivering affordable housing through the planning
system in urban renewal contexts: converging government roles in Queensland, South
Australia and New South Wales. Australian Planner. 52(2). pp.77-89.
Zhang, H. and et.al., 2016. Investigation of institutional changes in the UK housing market using
structural break tests and time-varying parameter models. Empirical Economics. pp.1-24.
Online
Market failure in the housing market. 2015. [Online]. Available through: <
http://www.economicsonline.co.uk/Market_failures/Types_of_market_failure.html >:
[Accessed on 14th December 2016].
Types of market failure. 2016. [Online]. Available through:
<http://www.economicsonline.co.uk/Market_failures/Types_of_market_failure.html>: [Accessed
on 14th December 2016].
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