Markets In Action: UK Housing Market Flashcards
What does the price of houses depend on
- the price that the seller is willing to agree for their property
- the actual price that the buyer is willing and able to pay
Too much demand for houses
Shortage of houses = power shifts towards the sellers
Too little demand for houses
Balance of power switches to buyers (should be able to negotiate a lower price)
What affects the demand of the housing market
- real income
- mortgage interest rates
- consumer confidence
- economic growth
- unemployment
- price of substitutes
When is the demand in the housing market effective
Only when potential buyers have the ability to pay
What is the PED for housing
Expected tonne inelastic - housing is considered a necessity and has few close substitutes
What is the housing supply
The flow of properties available for buyers at a given price in a given period
What does the condition of supply for houses include
- costs of production
- number of concentration companies
- economies of scale
- government taxation and subsidy
Supply of housing PED in the short run
Inelastic - house prices are determined almost completely by demand factors
Factors being rising property prices in the U.K.
- low mortgage interest rates
- high renting cost
- high land prices
- low level of new house building
Why do different areas have different demands for houses
- population growth
- absence of affordable housing/social housing
- incomes
- land prices
- speculative demand
Market failure in the housing industry
- information gaps
- empty housing and homelessness
- inequalities of wealth
- externalities from building homes
- labour immobility (due to high house precise and rent)
- chronic under supply of homes creating excess demand
Examples of government intervention
- rent controls
- subsidies for builders
- incentives to help first time buyers
- funding of apprenticeships for builders
- housing regulations
- building of social houses
