Demand and Supply housing Flashcards
buying a house is
an investment
because it is possible to invest in houses and make a return on the investment in the future
a fall in house prices can result in
which is
negative equity
where the value of a property’s mortgage is greater than the property’s market value
mortgage
is a loan taken out to contribute towards the cost of buying a house.
supply of houses is
the variety of houses available at a given time.
supply of houses made up of
new build and pre owned available at a range of prices.
supply of new built homes dependent on
costs of building them, number and size of building firms, gov policies that encourage or discourage building new homes.
price of housing is determined mainly by
demand factors.
demand factors affecting housing prices
state of the economy (think unemployment rates in diff areas)
economic growth- consumer confidence and high living standards increase demand.
substitute of buying is renting, changes in price of rents
most bought using mortgage, changes in interest rates.
Short run PED and PES for housing are
inelastic
why is the price elasticity of demand in the short run of housing inelastic?
because there are no close substitutes for housing.
why is the price elasticity of supply in the short run of housing inelastic?
supply of houses can’t be quickly increased as it takes time to build new houses.
if supply can’t increase much in the short run
an increase in demand can make prices rise sharply.
house prices have many knock on effects
increase jobs in construction industry
increase value of peoples assets increase consumer confidence encourage spending and investment
increase spending on furniture deco etc.
