UK Housing Market: Economic Determinants and Government Actions Report

This report provides a comprehensive analysis of the UK housing market between 2009 and 2019. It begins with an introduction to the contemporary business environment and the dynamic changes in the housing market. The report examines the fluctuations in average house prices over the decade, highlighting key trends and statistics. It then delves into the economic determinants influencing these changes, including economic growth, mortgage availability, interest rates, income levels, and consumer confidence. Furthermore, the report assesses the impact of government actions and policies on the UK housing market during this period. Finally, it offers predictions regarding the potential impact of COVID-19 on the future of the UK housing market, concluding with a summary of the key findings and a list of references.

Report
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK 1............................................................................................................................................3
How have average house prices in the UK changed over the period from 2009 - 2019?...........3
TASK 2............................................................................................................................................6
What are the economic determinants of the changes outlined in your answer to Question 1?. . .6
TASK 3............................................................................................................................................8
How has government action over the period 2009-2019 affected the UK Housing market?......8
TASK 4............................................................................................................................................9
Predict what would be the impact of COVID-19 on UK Housing Market?................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
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INTRODUCTION
Contemporary business environment are enhancing competitively as well as dynamically.
The main reason behind this fact is that it is changing at fast pace and also there are modification
into new concepts. It means that firms have to understand the requirements and development and
perform their business accordingly (Antonakakis and Floros, 2016). The main objective of this
report is to evaluate the UK housing market over last ten years. This report is based on UK
housing market which includes supply of housing, demand of housing, prices of house, rented
sector and intervention of government into housing market. This report covers the average house
price that changes over the period, economic determinants respective changes and government
action over that period. Along with this, prediction related to COVID-19 impact upon housing
market is also discussed in this report.
MAIN BODY
TASK 1
How have average house prices in the UK changed over the period from 2009 - 2019?
Housing market is considered as the demand and supply for houses mainly into specific
country. Its key elements are average house prices as well as trend in house prices. Moreover, it
includes some features such as demand for housing, supply of housing, prices of houses,
government intervention, rented sector and others (Arundel, 2017). Along with this, UK housing
market has few features like it is volatile due to several factors, has influences upon wider
economy such as when prices of houses are declining, customers spending trends are also
reducing. As it influences the economy and individuals’ homeowners so it is essential for them
to predict the future movements.
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House prices are impacted through various factors like mortgage rates, demand and
supply upon marketplace. In case demand outweighs supply then prices of houses are likely to
enhance. The United Kingdom has few of the highest average house prices into Europe. As per
the report of Statista Research Department, at the beginning of 2009 it has been seen that the
lowest prices for houses within United Kingdom with an average of 157.2 thousand British
pounds. Since in January 2013, the average prices of houses have been enhancing on quarterly
basis. The huge change into the prices of house is between year 2013 and 2014when house price
enhanced with about 9 % (Factors affect on house price,. 2020). Moreover, for those who are not
owned any house or presently are buying a home with mortgage and an alternative method used
to purchasing houses is renting, something that is specifically prevalent for large cities in which
demand for affordable residential are higher.
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In july 2019, the residential property markets of UK have been marked through
enhancing house price to rent ratio. The prices of residential property into UK seen its lowest
annual increase since year 2012 and average price of a house within UK is enhanced by 1.1%
prior to year 2019 and reaching towards an approximated value of about 216 thousand British
pound into second quarter of 2019. The trend of enhancing housing price is not exclusive to
respective country. As comparing with many European countries residential property such as
houses become very much expensive from 2013 into Ireland, Denmark, United Kingdom,
Netherland and Germany. In year 2017, average house price in England was 1000 British pound
which is more than another country in UK. The large enhancement into average house price is in
no small part down part down to capital city of country in which the average asking price was
more than double in comparison to United Kingdom average (Ball2016). Also, in London, for
those who may afford a mortgage, the saving done by purchasing over renting may be
advantageous. Apart from all this, number of housing transaction into UK may reach about 1.3
million by year 2022. So, with anticipated enhancement into transaction the average house price
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may develop in all over UK. Thus, the average house price is changed due to various factors
such as unemployment, economic growth, interest rates and availability of mortgage (Statics
2009 to 2019 house price. 2020). So, the shortage of supply means that the requirement for
housing and therefore, competitive market will push up house prices where as an excess of
housing means that prices reduces to stimulate buyers.
TASK 2
What are the economic determinants of the changes outlined in your answer to Question 1?
As there are various things which influences the prices of house like supply and market
demand, mortgage and so on. In case demand is more than supply then it is obvious that
residence cost will go on. The United Kingdom boasts few of presently the higher average value
of home. There are various alternatives for it, including essential purchase requisition- if owner
of the home allows its premises to be vacant for six months. These premises will give
permission at market segment rentals to person upon accommodations. The values of houses are
determined through market (Best and Kleven, 2018). In case demand increase or production
initiates falling the prices of home will be in balance. Therefore, in year 2000, the house value
develops too higher but drop in year 2008. The main reason behind this is changing house prices.
The long term raise into the prices of property is exacerbated through property cost which
outstrips the production. These have been estimated that above 175,000 homes as well as
apartments per year should be developed for accomplishing longer term property price threshold.
As it is observed earlier that new developments are included in just about 5% of house buying.
There are some economic determinants that play essential role into the changes of average house
prices and housing demand which are discussed below:
Economic growth: Demand of housing is contingent upon income. Effective
development of economies and enhancing wages will permit firms to purchase more houses; it
will rise inflation as well as raise the price (Cook and Watson, 2016). In real, house price
inflation is considered as stretchy earnings; economic growth drives towards a larger household
income percentage are invested. Similarly, reducing wages into downward would means that the
individuals who are not capable to afford it. While those who keep its insurance may fell back
upon living expenditure as well as eventually wind up being burglarised of its homes.
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Mortgage availability: The year between 1996 to 2006 is considered as to be the boom
periods; various financial institutions had interest in lending mortgage loans. It allows
individuals to] spend huge amounts of incomes. Financial institutions also authorized much
minimised reserved (Such as 100% housing loan). This simple application for mortgage implied
that house price is increased as more people can buy now. Thereafter year 2007, due to financial
crisis the banks and another financial institution has strained to obtain funds for borrowing
capital from markets. It also however stiffened its capital needs that require a highest payment
for building a property. It has reduced accessibility of student loan as well as reduces a price.
Interest rate deduction: No estimation of changing affects into home values which is
impacted through reduction of lending amounts between year 1991 and 2016. The approximated
relation into report NHPAU’S 'Affordability Issues'1 (2007) and 'Affordability Still Issues'2
(2008) depends upon raw data which covered the time period up to 2007. Therefore, the rate of
interests has enhanced consequently and developments into the business of mortgage have also
taken place along with the mortgages legislation and relationship among interest rates and
mortgages. These alterations are of level that shows, this model approximated for preceding
cycle which would not be utilised for month since year 2007.
Income: This was the time for enhancing at year 2007 pleading. The economy was
initiated to experiences a boom into economic theory. Most of the people begin to invest its
excess income upon rent; even first develop a property or move towards a better one (Khazragui
and Hudson, 2015). Various folks pursued that its earnings will also started developing as well as
are ready to spread monetarily into nearer term through having an costly house, ensured its
monthly income repayment will become very much cost effective. By comparing it has been
seen that there are downturn cycle in year 2008 or 2009, with enhancing unemployment and
thereafter whether reducing or wages rise accordingly. People were very much fortunate that
they have opportunity pay large volumes.
Interest rate: The mortgages repayment amount is influenced through interest rates. A
collection of sustained interest rates will considerably enhance costs of monthly mortgage as
well as leads towards low availability for room purchase (Knowles and Ferbrache, 2016). High
interest rates then rent is more appealing than purchase. In case borrowers have regular aggregate
loans, interest rates obtain large influences. For this, the stronger interest into 1990 to 1992 is
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triggered a very drop into property price of UK. As various purchasers are not able to buy house
at raise interest rate.
Customer confidence: Trust is considered as an essential term during declining as if
people will like to undertake chances out a personal loan. Mainly, conception more towards real
state market are important; consumer will postpone purchasing if it will think about house prices
will fall.
Supply: Shortages of delivery enhance the costs. More production will drop down the
costs. For this, a estimated 700, 000 new houses are developed fall in Irish real estate which
boom from year 1996 to 2006. At the time, when real estate market gets crashed, an vital
overproduction remained to marketplace. Prices of property were 15% as well as cost reduced
with production more than required.
Unemployment: It is somehow correlated with economic. Instead of unemployment, less
number of individuals mat afford a house (Lichfield, Kettle and Whitbread, 2016). Nevertheless,
then again insecurity threats can discourage people from joining the housing market.
TASK 3
How has government action over the period 2009-2019 affected the UK Housing market?
The most effectual way the government of nation may ease a pressure upon
accommodation cost on low income families is through facilitating them some kind o incentives.
Regulation which grows wages like accumulated additional tax, decent wages and others.
Housing cost of British has initiated from year 2002 to its yearly fall into year 2009. Value f
property in London, according to British newspaper, it have been viewed the worst costs lower
5.3%. Also, the properties of London values are considered to be one of the most common
discussion topics. It is hugely because of the fact that prices of houses has almost doubled since
before mid – 1990s. The respective country government is focused that insufficient residences
has been developed for satisfying the requirements of enhancing society. It concentrates upon to
enhance reconfigured as well as latest vacant apartments (Montagnoli and Nagayasu, 2015). A
sum of 118,190 new residences was constructed in England in year 2012. Also, there is a rise of
9% over last year but 31% reduces over 170,610 in year 2008. During past 5 years, only 610, 000
housing units has been developed in comparison last five year is about 800,000 and also a
reduction of 23%. This constraint upon new accommodation availability have assured that prices
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of house has still remained fair throughout past three years rather than complexity in obtaining
finances from investors. In about 15% of population is into rental market as well as this number
is anticipated is doubled during upcoming ten years. The affordable housing permeability of UK
is lower especially in Europe. The legislation of government is focused upon increasing supply
elastic properties so constructions of house are very much sensitive towards the requirements of
changing marketplace (Nuuter, Tupenaite, 2015). Several actions which are undertaken through
government of United Kingdom in respect of housing market from year 2009 to 2019 are
discussed below:
Develop more social housing: Enabling wider independence for local government to
enhance earnings for funding the procurement as well as development of housing benefits. So, it
can assists counteract the fall for last 10 to 20 years into committee facilities development.
Moreover, an option also maximise funds for approx 1400 housing committee which are
necessary for maintaining and developing about 3 millions houses into United Kingdom.
Minimising the number of empty house: There are various alternatives for it, including
essential purchase requisition- if owner of the home allows its premises to be vacant for six
months. These premises will given permission at market segment rentals to person upon
accommodations.
Stamp Duty: Presently, the government explored stamp duty upto 3% for features above
£250,000 residences from £ 60,000-£ 250,000 and pay about 1% for characteristics. So, the
enhancing trends into inheritance tax were concentrated upon minimising needs for feature above
£250,000 especially into real estate location such as London.
TASK 4
Predict what would be the impact of COVID-19 on UK Housing Market?
The corona virus has delayed the existent labour real estate market. At the time when
government were restricted towards advertisement of houses as well as also prohibited the
mortgage brokers from selling new property as part of huge affords to curb disease outbreak
impact. Towards the reaction for this outbreak, the ban k of England minimised rates of interests
before March between 0.75 to 0.25 %/ this then reported a another uncertain cut later at that
night borrowing cost will bring towards lowest ever rate of 0.1. While people of British also keep
moving into home purchasing centre, real estate borrowing was delayed as well as mortgage
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brokers department get closed permanently as portion of wider ranging started reducing COVID-
19 disease. Value of property as well as interaction has collected that from beginning of year
2020, managed to assists through reduced Brexit as well as political stability but this concept
have undertaken in backwards term.
Moreover, the corona virus crisis has had an unprecedented impact upon UK housing
market. As UK house price initiated to recover from uncertainty that is caused through Brexit at
the end of year 2019. And the Boris bounce from Tories election victory in December set the
market up for stronger start in year 2020. But the lockdown in UK due to corona virus means
that the purchaser cannot visit houses. The housing market effectually stopped during lockdown
and also not nay person are allowed to viewing of properties as this would has breached the rules
of lockdown. So, it is predicted that the UK house prices may dropped at faster rate. Also, the
centre of Economic and Business research has predicted that house price will fall by 13% at the
end of year due to pandemic. Moreover, the impact will vary across region based upon how
badly the country’s personnel were hit (Surminski, 2018). It has been also anticipated that in
Northern Ireland, Humber and Yorkshire will fall in harder manner. Also, into these areas the
main industries of retail, manufacturing and other have been affected badly. Although the
respective country’s government has provided a huge package for supporting them. This lack of
demand will mean few ceases of business to operate various employees will lose its job as well
as also a cut into their incomes. As housing is considered as the single biggest expenses item for
various households that means shortfall into incomes which has incredible potential to interrupt
United Kingdom housing markets. In February 2020, it has been seen that there is annual
increase into house prices of about 2.8%. However, it has been predicted that COVID-19 can
poses a potential road bump. The housing market of UK began in the month of March with
likewise trends to last months as key market indicators viewed a sustained level of buyer as well
as seller activity. So, the average house prices in respective month get changed from February’s
record it is higher where as annual growth nudged up to 3%. Also, during lockdown due to
COVID-19, house price of UK reduced as analyst tell that the property market was not
performing well due to constraints. Right move’s information viewed that average house selling
price fell up to 0.2% to £311,950. Also, the UK house prices have been raised by 2.1 % in April
last year. Analysis have viewed that present vendors has remained predominantly upon industry
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with whole stock available for selling down 2.6% as on 23 rd march lockdown was implemented
(Corona virus impact on house prices, 2020)
People do not has a working economy when customers are not able to buy as well as
vendors are not capable to sale and thus, focused should be upon what is essential to stabilise the
economy during lockdown. Also, few owners of houses can be worried regarding the risk of
brief term drops into the values of homes another considered the long term view as well as stay
on their promises to move forward (Wu, 2015). It is managed for helping others through lending
institutions moving to an expand the lifespan of current loans offers by 3 months and through
proposed regulation upon adoptable project cost. Therefore, whole analysis is shows that
COVID-19 has pessimistic impact upon the housing market of United Kingdom.
CONCLUSION
As per the above report, it has been concluded that as business environment are changing in
dynamic and competitive way so firm have to understand the requirements and development and
perform their business accordingly. Moreover, the , UK housing market has few features like it is
volatile due to several factors, has influences upon wider economy such as when prices of houses
are declining, customers spending trends are also reducing. Also, it’s get changes over periods.
Along with this, some economic determinants such as economic growth, mortgage availability,
income, interest rate deduction and so on that play essential role into the changes of average
house prices and housing demand. Also, some government action has also impacted the housing
market of UK like develop more social housing, minimising the number of empty house, stamp
duty and others. Apart from all these, it has been predicted that that COVID-19 has pessimistic
impact upon the housing market of United Kingdom.
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REFERENCES
Books and Journals
Antonakakis, N. and Floros, C., 2016. Dynamic interdependencies among the housing market,
stock market, policy uncertainty and the macroeconomy in the United
Kingdom. International Review of Financial Analysis. 44. pp.111-122.
Arundel, R., 2017. Equity inequity: Housing wealth inequality, inter and intra-generational
divergences, and the rise of private landlordism. Housing, Theory and Society. 34(2).
pp.176-200.
Ball, M., 2016. Housing provision in 21st century Europe. Habitat International. 54. pp.182-188.
Best, M. C. and Kleven, H. J., 2018. Housing market responses to transaction taxes: Evidence
from notches and stimulus in the UK. The Review of Economic Studies. 85(1). pp.157-
193.
Cook, S. and Watson, D., 2016. A new perspective on the ripple effect in the UK housing
market: Comovement, cyclical subsamples and alternative indices. Urban
Studies. 53(14). pp.3048-3062.
Khazragui, H. and Hudson, J., 2015. Measuring the benefits of university research: impact and
the REF in the UK. Research Evaluation. 24(1). pp.51-62.
Knowles, R. D. and Ferbrache, F., 2016. Evaluation of wider economic impacts of light rail
investment on cities. Journal of Transport Geography. 54. pp.430-439.
Lichfield, N., Kettle, P. and Whitbread, M., 2016. Evaluation in the Planning Process: The Urban
and Regional Planning Series (Vol. 10). Elsevier.
Montagnoli, A. and Nagayasu, J., 2015. UK house price convergence clubs and
spillovers. Journal of Housing Economics. 30. pp.50-58.
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.
Surminski, S., 2018. Fit for purpose and fit for the future? An evaluation of the UK's new flood
reinsurance pool. Risk Management and Insurance Review. 21(1). pp.33-72.
Wu, F., 2015. Commodification and housing market cycles in Chinese cities. International
Journal of Housing Policy. 15(1). pp.6-26.
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Online
Factors affect on house prices. 2020. [Online]. Available through: <
https://www.economicshelp.org/blog/377/housing/factors-that-affect-the-housing-
market/>
Corona virus impact on house prices. 2020. [Online]. Available through: <
https://www.cityam.com/how-badly-will-coronavirus-hit-uk-house-prices-in-2020/ >
Statics 2009 to 2019 house price. 2020. [Online]. Available through: <
https://www.statista.com/statistics/751605/average-house-price-in-the-uk/ >
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