Factors and Policies Affecting Private Housing in the UK

This report discusses the main factors affecting the price of private housing in the UK, including supply and demand analysis, demand curve, and supply curve. It also explores government policies aimed at stimulating demand, such as stamp duty and interest rates. The report highlights the impact of population, incomes, social trends, and availability of credit on housing demand. It concludes with a discussion on policies like loosening planning restrictions and inheritance tax reforms.

WRITTEN REPORT
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Table of Contents
INTRODUCTION ..........................................................................................................................2
Main body .......................................................................................................................................3
1.Main factors for supply and demand analysis to identify various factors to understand the
price of private housing within United Kingdoms......................................................................3
2.Recognizes and explain the main government or economies policies that can be used to
stimulate the demand regarding private housing within United Kingdom..................................7
CONCLUSION ............................................................................................................................10
REFERENCES..............................................................................................................................11
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INTRODUCTION
United Kingdom is the developed nation where people have adequate income sources
(Cook, 2017). The United kingdom ratio houses prices to the average UK houses prizes that has
enhances the sustainability sine 1970s .government has made many policies in order to maintain
interest rates, but still there are many factors that influence interest rates and due to which
property prices get affected. Present report focuses on the main factors of the demand and
supply and also analysis various Economic policies of the United kingdom in terms of Private
housing.
Main body
1.Main factors for supply and demand analysis to identify various factors to understand the
price of private housing within United Kingdoms.
there is significant relationship between supply and demand. Price is the common factor
which influence both. If prices are high then demand can get reduced whereas if prices are low
then it increases demand. But to make balance between demand and supply thee is need to have
clear monitoring over things that affect price (Guiso and et.al., 2017).If there is equilibrium in
prices that means there is proper supply of goods and demand is managed properly.
(Karunanithi, and et.al., 2017).
Demand Curve
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Demand curve can be described as visual representation of units that are being bought at
particular price. (Larondelle. and Lauf, 2016). This shows relations between price and demand
schedule. Elastic demand can be described as situation when price got down because of increase
in quantities bought Whereas inelastic demand can be defined as increase in prices of
commodity but there is not increased quantities purchased (Goldenberg,and et.al., 2017). If price
get changed then demand curve will be shift. That means if there is demand increase then curve
will move towards tight . This curve represents that there is shift demand of commodity at this
price. Whereas if curve is moving towards left that shows that demand is decreasing. Means
people are not ready to buy properties at his price range.
Supply curve
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This shows that the quantity which is being supplied in the market at particular price rate
but at the same time there are many factors that can affect supply of goods such as cost of
labour, production technology etc. By these factors price range can be increased
(Goldenberg,and et.al., 2017). Those price quantity combinations can be plotted within a curve
called supply curve as with the price represented on the axis called Horizontal axis, a supply
curve is an upward sloping, reflecting the willingness of mangers to sell more product so that
they produce within a market that has higher prices. Any change occurs within price of the
commodity can be traced through the help of a fixed supply curve.
Supply as well as factors affecting housing supply and demand is considered as a never
an easy thing that can be measure within real estate market that is due to because as it takes too
long time to construct new homes as well as fix up the old ones so that they put them back
within the market. Real estate is not same as the other industries within that it takes too long time
to buy as well as other properties (Patteeuw.and et.al.,2015).
Stamp duty
Stamp duty is considered as the tax paid on the buying of a residential property within
England that prices more than £125,000. Philip Hammond abatement stamp duty regarding all
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the properties that are up to £300,000 bought through first time buyers within the immediate
effect of Budget. This will result in a saving of up to £4000 to 9 out of 10 buyers. However as
per the Office For budget Responsibility forecast this action will rise price by 0.4%, with the
coming in 2019. Meantime , this help to buy schemes also provides boost of £11bn. It also gives
financing Until 2021 as per the view of Critics it consider as a misuse within chasing up the new
builds prices. Some factors that impacted on the housing demand that involves lower interest
rates as well as borrowing costs (Edquist. and Zabala‐Iturriagagoitia,2015). As when the interest
rates decline, people are willing to take more amount of debt as they able to pay the amount of
interest which is not as burdensome for them. As if the more buyers are flood to the market
there is demand of home increases.
Interest rates
It is expected that in the late spring significant percentage of hike will be observed which
will take the base rate of Bank of England to 0.76%. That can also add around £21ti the typical
£176,000 tracker mortgage but at the same time more than half of the borrowers regarding the
fixed rates that will go unnoticed through most of the Homeowners. Escorted by the weak
economy ,the market does not expect any kind of further hikes all over the year. Although
mortgages will remain cheap and with the inflation go faster rise in wages ,still feels like a
burden (Myerson, 2018).
Rise in house building
In 2016-2017 new homes building coming to the market has picked up around 216,000
homes ,up to the 21 % in 2015. But this only considers bringing back to the levels before the
financial crash as well as a long way of the 301,000 targets that are set through the government.
Here because of the Brexit there is migration people continue to decrease and also the
construction activity picks up ,after that housing equation of the United Kingdom will be less
pressing as compares to the previous years (Patteeuw.and et.al.,2015).
Increase of Home owners
Despite being the continues enhance of the property pricing ,the number of the homeowners has
risen for the first time within the 12 years. As per the financial crash of 2008 it created a clash
between the property prices and wages ,As a matter of importance government has positioned
accessible home ownership. Over 161,000 properties have been purchases after the Equity loan
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schemes was announced as with the 80% of then are considers as the firsts time buyers
(Goldenberg,and et.al., 2017).
Shopping Impacts location
Online services by various companies are impacting location searches in housing sector. But
there are other various factors that are also location based for example the local shops value are
decreasing within location choice as it may thank to the online delivery services. Locations such
as schooling as well as transporting services are considered as the primary location the impacts
on the buying decisions (Karunanithi, and et.al., 2017).
Population – Population of a country depends on four components such as net international
migration , birth ,deaths and cross -border migration that is UK and other nation. The number of
the household depends on the population as well. Regarding this purpose the net international
migration has separately presented. The change that has come within population of England
between 1992 and 2015 that was born outside of the UK has bee used as a proxy regarding
international migration. Regarding this purpose ,it is acknowledged that the population growth is
comparable to the household growth.
Real income Growth - £754 billion was an aggregate real household disposable income in
1991. £1,320 billion real aggregate household disposable income in 2016. This is a real term
enhances of 76 applying such of relationship within NHPAU report such as if the 1 percent
increase within real terms leads to the increase of 2 percent increases within house prices. As
holding al of these equal to increment of 75 percent that is expected to increase within the
house prices by 151 percent between 1991 and 2016 (Goldenberg,and et.al., 2017).
2.Recognizes and explain the main government or economies policies that can be used to
stimulate the demand regarding private housing within United Kingdom.
Housing in U.K.
In the U.K. Privately owned property is basically freehold or leasehold. Here freehold refers to
land owned by any UK nationality person and leasehold is the owner has right to use land which
is purchased from other for specific time period.
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The fundamental housing problem in the U.K. Is shortage of housing Accordingly, there may be
backlog of nearly 5 million households with unsuitable accommodation (Karunanithi, and et.al.,
2017).
Policies to deal with expensive house prices have focused on demand side which offers credit to
young home buyers.
Private housing Demand within U.K.
The demand in U.K. For private housing Depends on many factors along with housing price.
The demand for house is inversely proportionate to house price. At the higher price the real
income will fall and demand or private will fall as well Additionally at the higher prices of
private housing alternatives such as renting a house will emerge as more attractive and when
house prices are low the reverse will be true and renting will be considered as less attractive
(Goldenberg,and et.al., 2017). Thus, property demand will be sometimes gambling that enables
rise within price will increase demand as there should be speculative gain.
Various Non price determinants include :-
1. Population :- The demand for private housing depends upon overall population, migration,
birth rates and death rates. The higher the population higher would be the need for housing .
2. Incomes of households :- The distribution of income has a direct relation with the demand for
private housing. As the income level of individuals increases the demand of housing would
always increase and vice versa.
3. Social trends :- Any change in living standard such as preference of later marriage has
increase the demand for single living and hence it has decreased demand for flats and houses.
4. Rate of interest :- The general interest rates passed in by lenders such as building , societies
and banks. Higher rates results in difficult to purchase that land. And nominal rates of interest
will make it affordable (Edquist. and Zabala‐Iturriagagoitia,2015).
5. Availability of credit :- It also effects the affordability for housing. The easy availability of
credit facility will eventually increase the demand for private housing and vice versa.
6. Fashion :- Owing property in the U.K. Has become fashionable now a days. The reason
behind is increased television advertisements regarding house purchase, renovation, etc.
7. Price of substitutes :- Change in rental prices affects demand of private housing usually.
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8. Expectations :- The future expectation of decreasing house prices deeply affects the housing
demand in U.K. There is always this speculative element in housing that people expect to change
in property prices in nearby future.
9. Buy to let demand :- In the 1990's buy to let houses has become popular due to its easy
availability gives a boost to property market for investment purpose.
The elasticity of housing supply within the United Kingdom is low. It is considered lowest
within Europe as current policy always highlighting the elasticity supply so that house building
is more responsive to the changes within market demand (Myerson, 2018).
A loosening of planning restrictions- Relaxation of the planning constraints of greenbelt
restrictions or relaxation of planning constraints. There are no shortages of lank within the
United Kingdom, It is considered as the shortage of land though which the possible to build new
homes.
Inheritance tax reforms-This reforms proposes that the to effectively take the family homes
out of inheritance tax for all the households which are the richest through raising the thresholds
for the couples regarding helps to exist homeowners as well as their children and their
offspring. It hurts their offspring and Tenants due to this they co finance the policy via forgone
tax revenue without receiving any advantages. Thus, due to wealth inequality through this
policy. Because of this surging house prices are almost entirely responsible for returns that are
also called as growing returns as on capital that have been associated with enhancing inequality
within the world called rich world.
Bedroom tax - It is a term that cut back the sum of housing advantages that able to council
as well as housing association can claimed by tenants.
who have a spare bedroom benefit of housing is deducted for these tenant. That means the
rent is eliminated by the landlord , if is considered as the private accommodation the tenant
has to find housing within an area called cheaper area (Edquist. and Zabala‐
Iturriagagoitia,2015). Or if want to maintain an extra room or shift a smaller house unit. The
goals of the policy has basically to eliminate costs, but there are also additional effects in a
policy. To the degree that effected tenants move or can shift to smaller house this will makes
them free up space called ‘unused’. From the 1990s the evidences of UK housing benefit
reforms that it is suggests that these kinds of incidence of the bedroom tax may fall on the
landlords who eliminate the rents to discourage tenants from shift from or more affordable
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locations or the smaller homes. This can limit the potential to unused space or free up. To the
extent to this kind of incidence that does not fall fully on landlords, to trigger displacement the
tax has the potential. As there are also shortages of smaller properties within some areas with
possibly implications regarding the education of the children (Patteeuw.and et.al.,2015).
CONCLUSION
From the above report it has been summarized that Demand and supply are main determinants of
Economics there are various elements in demand and supply such as market equilibrium, law of
supply ,demand and many more. Furthermore, there are many factors that impacts on the pricing
of private hue in U.K such as population, interest rates ,income and many more .apart from it
there are various policies resulted to economic and having such as bedroom tax and inheritance
tax reforms.
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REFERENCES
Books and journals
Cook, P.J., 2017. The demand and supply of criminal opportunities. In Crime Opportunity
Theories (pp. 127-153). Routledge.
Edquist, C. and Zabala‐Iturriagagoitia, J.M., 2015. Pre‐commercial procurement: a demand or
supply policy instrument in relation to innovation?. R&D Management, 45(2), pp.147-160.
Goldenberg, R,and et.al., 2017. Distinction, quantification and mapping of potential and realized
supply-demand of flow-dependent ecosystem services. Science of the Total
Environment, 593, pp.599-609.
Guiso and et.al., 2017. Populism: demand and supply.
Karunanithi, K and et.al., 2017. Integration of demand and supply side management strategies
in generation expansion planning. Renewable and Sustainable Energy Reviews.73. pp.966-
982.
Larondelle, N. and Lauf, S., 2016. Balancing demand and supply of multiple urban ecosystem
services on different spatial scales. Ecosystem Services.22. pp.18-31.
Myerson, P., 2018. Lean Demand-driven Procurement: How to Apply Lean Thinking to Your
Supply Management Processes. Productivity Press.
Patteeuw, D.and et.al.,2015. CO2-abatement cost of residential heat pumps with active demand
response: demand-and supply-side effects. Applied Energy, 156, pp.490-501.
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