Supply and Demand in UK Housing Market

Essay by sagi014University, Master'sB-, May 2009

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IntroductionHousing is of great importance to the economic development and the social welfare of a region because it produces a type of goods that besides being considered an asset, are indispensable in satisfying a basic necessity within individuals.

For this reason the housing analysis is highly important from the point of view of the economic and social policy, because it is not only part of the wealth of the families but also of a country itself. This work will analyse the different factors that affect demand and supply when buying a house in London.

The diverse population of London leads to a wide range of types of housing being available: houses, flats, bungalows, maisonettes among some others, having the majority of its housing market as a second hand one.

This reports will make a detail analysis of the London housing market, focusing on the main factors that affect the supply and demand during the process of buying a house and finding where the free market fails and therefore the government as to intervene.

1. Demand of Housing:For every housing transaction there is a seller and a buyer. The seller will decided the price that they are willing to accept for the property and that they think the property can achieve. The buyer will decide what they are willing to pay for a property. However there are factors that will heavily influence the demand and supply of houses. These factors are:DemographicIncomePrice of HousingInterest RateCost and Availability of credit /MortgageConsumer preferencesPrice of substitutesPrice of compliments2. Supply of housing: In order to produce a new housing supply the following factors are required:LandLabourOther Inputs (Electricity, Building Materials )The quantity of housing produced for sales is determined in relation to the cost of the factors mentioned above. Second hand housing supply is determined by the...