Fluctuation in Average Housing Prices in the United Kingdom from 2009 to 2019

This report analyzes the changes in average housing prices in the United Kingdom from 2009 to 2019, including economic determinants, government actions, and the impact of COVID-19. It also discusses the implications of these changes on the housing market.

Report

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
1. The way in which average housing prices in the United Kingdom are changed over the
period from 2009 to 2019............................................................................................................1
2. Economic determinants of the changes in the average housing prices in the United Kingdom
over the period from 2009 to 2019..............................................................................................5
3. The way in which government action over the period 2009 to 2019 affected the housing
market of United Kingdom..........................................................................................................7
4. Prediction of the impact of COVID-19 on housing market of United Kingdom....................8
CONCLUSION..............................................................................................................................10
REFERNECES..............................................................................................................................11

INTRODUCTION
Internal and external environment can be defined as the combination of various types of
elements that may leave impacts upon economy and different aspects that are related to it. In
order to maintain stability in the growth of economy it is very important for all the countries to
analyse changes in various elements such as housing prices, unemployment etc. It will be
beneficial to determine the potential changes which may take place in future and it could be
advantageous to formulate effective strategies for future (Alexiou, Chan and Vogiazas, 2019). If
a nation is not able to analyse and evaluate such changes the it may affect the growth rate of
economy. Present report is based upon analysis of fluctuation in average housing price of United
Kingdom for which different elements will be discussed in this assignment. This project covers
the way in which changes took place during 2009 to 2019, economic determinants of the
changes, action taken by government which has affected the housing prices during the period etc.
Apart from this, predictions regarding the impact of COVID-19 on the housing market of United
Kingdom are also covered in this project.
MAIN BODY
1. The way in which average housing prices in the United Kingdom are changed over the period
from 2009 to 2019
The housing market can be defined as a market where supply and demand of houses are
focused to carry out business. The key elements of it are mortgage market and house prices as
with the help of them the changes in it are analysed (Al-Masum and Lee, 2019). The Housing
market of United Kingdom have faced huge changes in the average housing price during the
period of 2009 to 2019. In this period a huge boom in the prices have taken place which has
increased the average housing price in the country. Following charts show the starting and end
price of UK housing market:
Housing prices in 2009:
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Illustration 01: Housing prices of United Kingdom, 2020
(Source: Housing prices of United Kingdom, 2020)
Housing prices in 2019:
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Illustration 01: Housing prices of United Kingdom, 2020
(Source: Housing prices of United Kingdom, 2020)
From both the above charts it has been determined that in January 2009 the average
housing price was 157234 and in January 2019 it was increased up to 228314. Both the charts are
showing massive changes in the price as the charts are following the increasing trend. During
2009 to 2013 the rates were fluctuating and following the incluning as well as decliing trend.
Since year 2014 the housing prices are increasing continuously which has affected the whole
housing market (Housing prices of United Kingdom, 2020). There are various economic
determinants which are resulting in the changes these are affordability, population, interest rates,
economic growth and real income, mortgage availability, confidence, cost of renting etc. The
following chart shows the annual house price change in United Kingdom:
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Illustration 3: Changes in annual housing prices, 2020
(Source: Changes in annual housing prices, 2020)
From the above chart it has been determined that annual house price is changing
contonuously. In year 2008 the changes were below 15% but in 2009 a huge change in the
market took place and increased the rate up to 8%. Since 2009 the changes are fluctuating year
by year. In 2011 the changes were also in negative which shows that during this year the rates
were declined massive. After 2011 negative changes are not being recorded the house prices are
fluctuating continuouly (Changes in annual housing prices, 2020). From the chat it has been
identified the biggest change in the housing prices of United Kingdom took place during 2009
nad the rate of change at that time was 9.1%. The highest change rate was related to 2014 and the
percentage of it was 9.4%.
All the changes in the prices of housing market are affecting the supply of the market
because the demand is very high as compared to supply. When the demand is very high then the
prices are increased by the entities dealing in the houses as they want to earn more and more
profit. One of the key determinants of changes is increasing demand of houses which is the base
of continuously increasing housing prices (Apergis, 2019).
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2. Economic determinants of the changes in the average housing prices in the United Kingdom
over the period from 2009 to 2019
The average housing prices of United Kingdom have changed during year 2009 to 2019
and there are various types of economic determinants which are led this change (Apergis, Hayat
and Kadasah, 2019). All of them could be understood with the help of following discussion:
Population: It is one of the main factors which is resulting in the increased housing
prices of United Kingdom. When the number of individuals living in an area will be increased
then it will result in higher demand of houses and due to this the average price of housing will be
increased. The chart below shows the changes in population of England and project it for future:
(Illustration 04: Population of United Kingdom, 2020)
(Source: Population of United Kingdom, 2020)
From the above chart it has been analysed that the population of England in increasing
since past few years and it will be more than 60000 till 2041. In 2009 it was less than 55000 and
2019 it was more than 55000 and this change in population results in continuous increment in the
prices of houses and their demand (Population of United Kingdom, 2020). According to chart
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when the population of the nation will be increased till 2041 therefore the housing prices will the
same year will also be increased.
Cost of renting: In United Kingdom the cost of renting is increasing and it is becoming
less affordable for the individuals. They think that if they have to spend a very high money on
the renting so why they should not by their own house by taking loan. It can help them to
enhance their wealth and have their own house (Fan, Yang and Yavas, 2019). Due to increment
in the cost of renting the house holds started to make efforts to buy a house with the help of
mortgage. The rent cost of UK is very expensive and the individuals who are spending their
money in it are now trying to acquire their own property so that they can live in their own house
and save the costs of rent. It is one of the main factors which has contributed in the increment of
housing prices of United Kingdom as individuals are preferring to have their own house rather
than spending on rent.
Economic growth and real income: Economy of a country depends upon the income
level of the individuals who are living in it. When income of a person increases then it results in
higher economic growth and ability of buy a house. The demand of housing in UK is increasing
sine last 10 years because the level of income along with standard of living is following the
inclining trend. With the increment in income the demand of houses in UK is increasing
continuously which is also affecting the price of housing in the country.
Confidence: Increasing or decreasing demand in the housing market depends upon the
confidence level of consumers. The confidence of people about the future of housing market and
economy provide increment to the housing prices. For example, if individuals think that the price
of houses will be increased in future then they tend to buy a house in present so that they can
save their funds of paying more for the same property in future. Expected rise in price results in
higher demand of people so that they can gain from rising wealth. It is also a cause of increment
in the housing prices of United Kingdom (Lin and Tsai, 2019). As during years 2009 to 2019 the
prices of houses were increasing so the demand for the same were also increasing as people want
that they should buy a property on lower cost.
Mortgage availability: It is also a factor which is resulting in changes in the housing
prices of United Kingdom. It helps to determine the effective demand for houses is willingness
of banks to lend mortgage loans. In UK any individual with a significant income can apply for a
mortgage and the availability of it is also very high which results in increased demand of houses.
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As it is easy to get a mortgage so people want to secure their future by raising their wealth with
the help of owning a new property. With the higher demand of individuals for a house the prices
of housing is increasing continuously. During year 2009 to 2019 the average housing prices is
increased because the availability of mortgage in this period was very high. Anyone with a good
income can apply for a mortgage which can help to own a new house.
Interest rates: This economic determinant is very important to determine the cost of
mortgage interest repayment and it has also resulted in the changes in the housing prices during
the year 2009 to 2019. Most of the home owners of UK prefer to take variable mortgage rates
because any type of changes in the base rate by the banks will directly affect the interest
payments. It also helps to determine the level of affordability to take a loan and pay it out.
Changes in the interest rate can deter individuals from buying because a huge part of their
income is engaged in mortgage payments. It inspires people to buy house which increases the
demand and results in higher prices of houses in the nation (Pandey and Jessica, 2019).
Affordability: This determinant is related to the rising income of individuals. As
personal income of UK’s citizens is increasing which enhances their affordability and now, they
are able to spend more on housing. Due to this the demand in the housing market in increasing
continuously which is resulting in the changes in the housing prices. According to this
determinant, when income of a person increases then it enhances the ability to afford to spend
more on buying a house and it cause the bigger increment in the demand. During year 2009 to
2019 the affordability of individuals in UK is increased which has created a boom in the average
housing prices in United Kingdom (Paramati and Roca, 2019).
All the above described economic determinants have affected the price of housing in
United Kingdom. Due to all of them the price of houses in UK is increasing since past 10 years.
All of them have affected the housing market and resulted in fluctuations in average housing
prices of the country.
3. The way in which government action over the period 2009 to 2019 affected the housing
market of United Kingdom
Housing prices of United Kingdom have experienced a rise during year 2009 to 2019 and it
has resulted in the increment of demand of houses in UK. There are various actions which are
taken by the government and it has affected the housing market of UK. Some of them are listed
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below which can help to analyse the implications of government’s actions upon the housing
marketed of the country:
Increased interest rated: During the year 2008 the interest rates were increased the
government of UK which has resulted in the decreased house prices and increased demand of
houses. Due to this, most of the real estate agencies have faced losses as they had to sale their
property on a lower cost (Tsai, 2019). It is one of the major actions of the governmental party of
UK which has affected the housing market of the country and it has also resulted in higher
demand of houses. With the massive demand the prices were increased in 2009 and a major
boom was experienced by the housing market during 2009.
Economic recession: In 2008 UK was dealing with economic recession and due to this,
different policies were imposed by the legal authorities which has affected the housing market
negatively. Government of United Kingdom decided to increase the interest rate on housing loan
so that funds could be generated to deal with economic crisis. The higher interest rates decreased
the demand of houses in 2008 and the condition of market was very bad. All the actions which
were take by the government during 2008 affected the whole nation negatively so changes in
them were made during 2009 and it resulted in higher demand of houses. It helped UK to deal
with recession as the flow of money within the region was increased (Payne, 2020).
Unemployment: In United Kingdom unemployment was increasing massively and it has
also affected the housing market of UK because various new policies were introduced by the
government in this context. In order to increase the employment, the legal authorities targeted the
housing market and advised the companies to enhance their number of employees. Due to this,
the cost of recruitment of the whole market was increased and it resulted in higher prices of
houses. Due to this, the growth of economy was affected because the higher rated affected the
demand and income of the housing market.
All the above described actions were taken by the government of UK which has resulted
in affected housing market. In order to deal with all the negative implications, it is very
important for the UK’s government to make sure that effective and appropriate policies for the
development of economy should be formulated so that growth could be acquired (Tsai, 2019).
4. Prediction of the impact of COVID-19 on housing market of United Kingdom
The government of UK has estimated that due to COVID-19 the housing market of UK
will get affected massively. The legal authorities have decided to support the market including a
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stamp duty holiday as it has been predicted that the house prices in UK will be decreased dur ot
corona virus crisis. RICS (Royal Institution of Chartered Surveyors) has called for a stamp duty
as it can help to encourage the potential customers to act immediately right after the passing of
public crisis.
According to legal authorities of UK the London house prices are dropped in the three
months due to COVID-19 and it has been estimated that it will drop more due to this crisis. It is
very important for the government to formulate effective policies to deal with the decrement in
the price of housing market. It may affect the demand of housing massively due to which the
supply will get affected and the economy may face a decrement with a higher percentage. Most
of the legal officers in UK have said that the virus will drive rents down in major cities such as
London of UK over the three months (Call for stamp duty holiday, 2020).
COVID-19 crisis will affect the income of individuals as they are not allowed to go out of
house and work. Only work from home is allowed and most of the entities are firing the
employees as they are not able to bear the cost of salaries which are paid to them. It shows that
the income level of potential buyers will also be affected due to the corona virus crisis and it will
affect the demand of housing market (Zhang and Fan, 2019). There are various predictions which
have been made in context to the COVID-19’s impacts upon the housing market of UK. The
major one is decreased prices of houses, reduced demand due to lower incomes etc. In both the
conditions UK will have to suffer from economic crisis. In order to respond them properly it will
be very important for the government of UK be prepare to deal with all the negative situations.
For this purpose, the legal authorities have decided to support the housing market by asking for
stamp duty holiday.
Some of the economic analysts have predicted that UK may have to face the crisis such
as 2008 as the condition after the lockdown may get worst. Due to corona virus most of the
companies are terminating their employees as profits are not generated by them because of no
production. It is affecting the household income which may lead the whole region towards a
decreased or unstable economic growth. It has been predicted by property experts that there will
be changes in the consumer behaviour as a result of pandemic (Impact of COVID-19 on UK’s
housing market, 2020). If the economic condition will become worst as 2008 then it will be very
difficult for UK to deal with all the negative situation which may take place in housing market in
upcoming period.
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CONCLUSION
From the above project report, it has been concluded that for all the nations it is very
important to analyse external as well as internal market so that all the factors which may affect
the economic growth could be determined. Since 2009 to 2019 various changes are being
recorded in the housing market of UK. The major one was changes in the average house price
which is increasing since 2009. There are various economic determinants which has supported
the changes. These are population, economy and real income, affordability, interest rate,
mortgage availability, confidence of buyer and cost of renting. There are various types of
governmental policies which were formed by UK’s government and affected the housing market.
All of them were related to unemployment, increased interest rates and economic recession. It
has been predicted that due to COVID-19 UK’s housing market may get affected as it will result
in lower housing prices.
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REFERNECES
Books and Journals:
Alexiou, C., Chan, A. S. and Vogiazas, S., 2019. Homeownership motivation, rationality, and
housing prices: Evidence from gloom, boom, and bust‐and‐boom
economies. International Journal of Finance & Economics. 24(1). pp.437-448.
Al-Masum, M. A. and Lee, C. L., 2019. Modelling housing prices and market fundamentals:
evidence from the Sydney housing market. International Journal of Housing Markets
and Analysis.
Apergis, N., 2019. The impact of fracking activities on Oklahoma's housing prices: A panel
cointegration analysis. Energy policy. 128. pp.94-101.
Apergis, N., Hayat, T. and Kadasah, N. A., 2019. Subjective well-being in housing purchasing:
Evidence with survey data from the UK housing residential market. The Quarterly
Review of Economics and Finance. 74. pp.328-335.
Fan, Y., Yang, Z. and Yavas, A., 2019. Understanding real estate price dynamics: The case of
housing prices in five major cities of China✰. Journal of Housing Economics. 43.
pp.37-55.
Lin, W. Y. and Tsai, I. C., 2019. Trader differences in Shanghai’s A-share and B-share markets:
Effects on interaction with the Shanghai housing market. Journal of Asian Economics.
64. p.101128.
Pandey, R. and Jessica, V. M., 2019. Determinants of Indian housing market: effects and
counter-effects. Property Management.
Paramati, S. R. and Roca, E., 2019. Does tourism drive house prices in the OECD economies?
Evidence from augmented mean group estimator. Tourism Management. 74. pp.392-
395.
Payne, S., 2020. Advancing understandings of housing supply constraints: housing market
recovery and institutional transitions in British speculative housebuilding. Housing
Studies. 35(2). pp.266-289.
Tsai, I. C., 2019. Interregional correlations in the US housing market at three price tiers. The
Annals of Regional Science. 63(1). pp.1-24.
Tsai, I. C., 2019. Relationships among regional housing markets: Evidence on adjustments of
housing burden. Economic Modelling. 78. pp.309-318.
Zhang, D. and Fan, G. Z., 2019. Regional spillover and rising connectedness in China’s urban
housing prices. Regional Studies. 53(6). pp.861-873.
Online
Housing prices of United Kingdom. 2020. [Online]. Available through:
<https://www.statista.com/statistics/751605/average-house-price-in-the-uk/>
Changes in annual housing prices. 2020. [Online]. Available through:
<https://propertydata.co.uk/charts/house-prices>
Population of United Kingdom. 2020. [Online]. Available through:
<https://www.economicshelp.org/blog/15390/housing/factors-affecting-supply-and-
demand-of-housing/>
Call for stamp duty holiday. 2020. [Online]. Available through:
< https://www.cityam.com/calls-for-stamp-duty-holiday-as-uk-house-prices-set-to-fall/>
Impact of COVID-19 on UK’s housing market. 2020. [Online]. Available through:
< https://www.cnbc.com/2020/05/11/coronavirus-impact-on-uk-house-prices.html>
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