Property Prices in the UK - Essay Example

System Thinking/Soft Systems (Property Prices in the UK) I. Introduction Britain is amongst the few great countries of the world that help enhance humanity all over the planet. Being amongst the few great ones, the U.K. is also amongst the richest. Still the great country has always been short of property supply against its mammoth demand of terra firma. The past figures pertaining to the property prices in U.K. have constantly proved the property prices to be a lot lofty against the inflation rates since the beginning of the 21st century. Several factors have caused the increase of demand in the property prices since the past decade, factors like the number of divorces, the population figures, etc. are some of the major causes of the unstable rise in the prices of property in Britain. With a support from the current macro – economic growth which has been some what remarkable in the past year as the GDP had an interminable growth in the year 2006 (OECD Economic Outlook, 2006) also supported by a perpetual rise in the investment and an auxiliary rise in the consumption (OECD Economic Outlook, 2006). This constant growth in the property prices also has its drawbacks; some of these drawbacks are incompetency regarding property purchase and loath for having kids. The demand for housing has also increased tremendously due to the increasing net immigration figures estimated between 250,000 to 400,000 concluded on basis of figures available for each of the years ranging from 1997 – 2007 (Office for National Statistics, 2007) The solution for this property crisis had been provided by the Baker report which were: To eradicate green - belt labels and certain planning departments. Vividly boost the real estate development to overcome the shortage of about 3 million homes. Reduce net immigration. II. Factors affecting property prices in the U.K. using a spray diagram Urban Land Rise in interest = Low demand Rural Land Fall in interest = high demand Geographical Factors Bank interest rates Govt. Policies Increase in revenues of the public Higher Standard of Living Policies pertaining to immigration Increased spending capacity Policies pertaining to geography (green belts, urbanization, etc.) Govt. Panning Departments or agencies Fig. 1 III. CATWOE Clients New Immigrants that move to the U.K., the figures of new net immigrants is estimated at about 250,000 to 400,000 concluded on basis of figures available for each of the years ranging from 1997 – 2007 (Office for National Statistics, 2007) Divorced couples: Once a couple gets divorced one of them will have to move out and search for a new home, but the good news is that in the year 2005 - 2006 the divorce rates were down by about 4.5 % (National Statistics “U.K.”,2006) , which if remained constant may not decrease but slow down the property boom. Newly married couples. Actors (Those involved in the structure): Banks and Mortgage suppliers. Property dealers and brokers. Individual entities. Companies or Organizations that deal in property. Transformation Process: Fig. 2 Weltanschauung (Worldwide view): The baker report suggests the following measures to control the unstable boom in the property markets: To eradicate green - belt labels and certain planning departments. Vividly boost the real estate development to overcome the shortage of about 3 million homes. Reduce net immigration. The instability in the property prices usually arises due to sudden demand or supply in the property which are normally caused by change in the figures pertaining to net immigrants, divorce rates and death rates. This is the reason to why the property prices in various different areas of the U.K. have such a huge amount of variation. Owners: The U.K. Government and its various policies regarding immigration, green belts, etc. The Banks and various interest rates as well as mortgage rates. Property Dealers. Property owners. Environment: Urban immigration ratio. Banking and interest policies. Infrastructural Development in the particular area. Property manipulators. Extremely low or extremely high availability of land. Flat or apartment Culture. IV. Root Definition Do X by Y to achieve Z (X) Improve net immigration figures, as well as help eradicate a few green belt areas. (Y) Improve on the mortgage policy and benefit the customers and actors with nominal amount of interest rates. (Z) To insure that every individual’s housing needs have been fulfilled. V. Casual Loop Diagram (CLD) Fig. 3 VI. Possible Scenarios 1. The traffic of net immigrants that require housing facilities in the United Kingdom cannot be stopped very easily. 2. Mortgage rates and interest rates increase due to higher demand of property by the individuals. 3. Lower availability of Urban Land. VII. Discussion of the scenarios: The traffic of net immigrants that require housing facilities in the United Kingdom cannot be stopped very easily. Net immigration cannot be stopped as under most circumstances the immigration is also necessary for the development of the country due to the fact that major companies extract good talent from other countries by providing various good opportunities. Thus it is out of the question to stop the immigration, but the unwanted immigration can be very easily put to a hold by making certain changes in the government policies pertaining to immigration. In developed countries like the United Kingdom, the illegal immigrants also add as a negative aspect of this issue, and in such a huge country as U.K. it is almost impossible to find all of the illegal immigrants that do not have current stay-permissions or proper documents and visas. Mortgage rates and interest rates increase due to higher demand of property by the individuals. Mortgage rates and property finance rates are a great factor towards the volatility in the property prices. In the case these rates are higher they immediately decrease the demand of property due to the fact that the individual’s capacity to meet the sufficient expenses will decline which will indirectly affect the demand of property in a depressing manner and decrease its prices. And the same goes in the case of decline of the interest and mortgage rates, if the mortgage rates decline the property prices increase due to easy availability of funds and higher demand of the property. Lower availability of urban land The availability of land is a geographical factor that helps determine the property prices and the trend of the property markets. Property prices will be a lot higher in urban areas as and when compared to those in the rural areas, due to the fact that the infrastructural requirements in the urban regions are completely fulfilled and also that the property in an urban area will be worthy due to the fact that the city will fulfill all of the clients requirements pertaining to work and play. References: Office for national statistics, 2007: Total International Migration (TIM) to / from the U.K. 1997 – 2006. http://www.statistics.gov.uk/cci/nugget.asp?id=260 National Statistics “UK” 2006: “OECD”. Main economic indicators, Statistics Directorate. OECD Economic Outlook, 2006. Pages pertaining to data on property markets: 12 – 17. Read More