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Macro and Microeconomics Factors in the UK Housing Market - Research Paper Example

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This work "Macro and Microeconomics Factors in the UK Housing Market" describes the housing market as an important part of the real estate business. The author analyzes the demand for housing in the UK, taking into account macro and micro-economics factors. It is also significant to mention property prices, debt, and equity…
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Macro and Microeconomics Factors in the UK Housing Market
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Download file to see previous pages The housing industry is divided into residential, commercial and industrial segments. Economists define supply in terms of service units, that is, a physical unit can be deconstructed into the services that it helps provide. These housing unit services are considered as an unobservable theoretical construct. Housing stock depreciates making it qualitatively different from a brand new constructed building.
The owner, user/owner and renter comprise the demand side of the housing market while the renovators and developers comprise the supply side of the market. In order to implement the simple demand and supply analysis to the housing markets, several modifications have to be made to the standard microeconomic procedures and assumptions (WILLIAMS, 1997: 2000). Particularly, the specific characteristics of the housing market must be accommodated. These include:
Heterogeneous- every piece of real estate is unique, in terms of building, location and it’s financing. This makes pricing difficult, increases the costs of searching, restricts substitutability and creates information asymmetry.
Durability- houses are durable. A building can last for decades or even centuries. The hosing markets are modeled as a stock/flow market. About 98% of supply in the market consists of the existing house's stock while the remaining 2% consists of the flow of new development. The effect of housing market adjustments tends to be mitigated by the relatively large stock of current obtainable buildings.
High transaction costs-buying or/and moving into a home is costly as compared to most types of transactions. These costs include moving costs, search costs, housing costs, deed registration fees, and land transfer taxes.
The UK housing market has been slowly improving since it reached record lows in 2008 and 2009. Current home sales increased by 2.1% in October and the national median price for an existing home is 11.1% which is a higher figure than one year ago. The Federal Reserve beige book states the UK housing industry has experienced considerable improvement and has been of great help to the economy since the 2007-2008 financial crises. ...Download file to see next pagesRead More
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