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Recent developments in the UK housing market - Essay Example

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The paper concerns the issue of price rise in the UK housing sector. It is stressed that during the period starting from the year 1998 to 2007 there had been a significant rise in the house prices in the UK which had a growth rate of around 11% annually…
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Recent developments in the UK housing market

Download file to see previous pages... In general house prices must behave in a similar manner as that of inflation rates prevailing in an economy. However, if we consider the recent boom in housing prices in the UK since the year 1998, it can be observed that the housing prices behaved in an opposite direction to that of the general inflation rate of the UK’s economy. It implies that there has been a significant rise in the overall house prices of UK since 1998 but the general inflation was on the lower side and did not rise that significantly as compared to the house prices.
Next, if we look at the relation between the house prices and income of the households in the UK it can be observed that the house prices increased at a greater rate than the income of the households during the period of the recent housing boom.
If we look at the current affordability of the houses in the UK it can conclude that the house properties are less affordable because of the high house price to income ratio at present. It implies that the UK households do not have enough income to be able to buy houses which are of high prices. Moreover, the house prices are directly linked to the changes in income levels of households because most of the houses are bought through mortgage services offered by financial institutions. Hence it is very unlikely to get loans to buy houses with lower income levels. This is how the house properties became less affordable for people who were having a comparatively lesser rise in income levels as compared to the rise in house prices in the UK.
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implies that there has been a significant rise in the overall house prices of UK since 1998 but the general inflation was on the lower side and did not rise that significantly as compared to the house prices. It means that although the house prices rose significantly the prices of other goods and services did not rise that much. Next if we look at the relation between the house prices and income of the households in UK it can be observed that the house prices increased at a greater rate than the income of the households during the period of recent housing boom. If we look at the current affordability of the houses in UK it can concluded that the house properties are less affordable because of the high house price to income ratio at present. It implies that the UK households do not have enough income to be able to buy houses which are of high prices. Moreover the house prices are directly linked with the changes in income levels of households because most of the houses are bought through mortgage services offered by financial institutions. Hence it is very unlikely to get loans to buy houses with lower income levels. This is how the house properties became less affordable for people who were having comparatively lesser rise in income levels as compared to the rise in house prices in UK. Answer 3 There has been a significant rise in the demand of houses in UK during the period of 1998 to 2007. There are various factors which led to this increase in housing demand like increase in disposable income, lower interest rates, and increased availability of mortgage finance. The wages have increased at a faster rate than inflation from 1998 to 2007. Now since the households have the tendency to spend a certain proportion of their income levels on housing, the demand for housing ...Download file to see next pagesRead More
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