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Irrespective of the developed, developing or under developed countries, people usually have the habit of taking loans for purchasing or constructing a house. The difficulties in getting loans have prevented people across the world to think about purchasing a home at present and the real estate business people were forced to reduce their activities because of the less demand for buildings. Even though the latter half of 2009 and the beginning of 2010 have shown some sign of a revival, many people are still hesitant in spending much on the housing market.
UK and Bulgaria are two European countries in which lot of construction activities were going on earlier. But the global recession has badly affected these countries and the construction sector and the housing market are going through a bad patch. UK is one of the strong and developed countries in the world whereas Bulgaria is economically poor compared to UK. Both the countries have democratic administration at present though the head of UK is the monarch at least on paper. Bulgaria was under communist regime earlier. Stevenson (2010) has reported that the economy is emerging out from recession and grew slightly in the fourth quarter of last year in UK. Moreover, industrial production also increased in last November more than expected (Stevenson, 2010).
As per the article Best Bulgarian Real Estate – Your Trust Worthy Bulgarian Real Estate Partner (2008), the Bulgarian property market is the current investment hotspot and offers countless opportunities to any open-minded investor. A recently released report by the European Bank for Development and Reconstruction, property prices in Bulgaria have increased by 145% in the last three years. Moreover the value of the Bulgarian properties has risen 5 times after the country joined the European Union in 2007 (Bulgarian Real Estate
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housing market had repercussions leading to worldwide recessionary trends because of globalization. It all started when financial companies started depending too much on the innovation in the blind faith that it will yield returns. The symptoms of the malaise started emerging in the US mortgage business first.
For example in the UK, the base rate (repo rate) is set by the Monetary Policy Committee and the Bank of England while in the United States; the Federal Reserve sets the same Interest rates are set up after looking into several macroeconomic perspectives that affects the economy of a country.
In mean time, speculators find their way in the market believing of making profits through short-term buying and selling. This drives to an increase in demand but at some point, demand decreases or stagnates with a subsequent increase in supply resulting to a sharp drop in prices (Baker, 2008).
Many authors have conducted researches to determine which sector is dominant in housing sector as well as to identify the primary reasons behind these changes. Some of the most renowned researched covering these aspects have been presented in the subsequent part of this paper.
The author of the paper entitled "Recent developments in the UK housing market" touches upon the fact the UK economy had to face recession in the last two years which had an impact on reducing the UK house prices. It should be noted that highest growth in house prices which were significantly higher than the average UK housing prices were observed in London area.
According to the paper the United Kingdom housing market is highly fragmented and involves heavy investment in form of individual household and properties for rental purposes. The housing market is very crucial for the UK economy and consists of high, medium and low income residential, shopping and industrial complex.
Consequently, British households will benefit by a slight global warming. Because there are limited European studies conducted in this topic, comparisons are hard to find. Therefore, the results from this study can not be confirmed with certainty, or refused completely.
This is because housing consumes a large part of the income of a typical household.
Both prices and quantity of houses available in the market are determined by the construction sector and households. The availability of houses in the market is largely dependent on one main variable, that is, the demographic factors governing the place.
The housing market in the UK continues to be dramatically supported by that of historically low interest rates, low rates of house building, steady income growth, and of course, positive demographics; as well, "In our modeling, even very large (by recent standards) macroeconomic shocks fail to create a significant downturn in the market." (Cameron et al, 2006).
An increase in the demand for houses led to the increase in the price in the housing market, this increase in demand also led to an increase in the demand for mortgages in the United States. As a result of the increased in prices of houses in the economy the buyers increased their demand for mortgages in order to gain from the low interest rates and also added value of the houses.
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