The UK houseing Market

Essay by boxer123University, Master'sA-, December 2004

download word file, 5 pages 4.6

2. Assignment


It has been estimated by the government that Britain will need an extra 4.5 million new homes in the next 25 years.

Q1: Examine the possible reasons for this anticipated extra demand for houses. Use supply and demand analysis to illustrate how these factors will affect the British housing market.

Q2: Analyze the costs and benefits likely to be associated with a regional buoyant housing market.

What is the housing market?

The housing market is the overall market, where houses and other properties are bought and sold. Like any other market it can be modelled by using demand and supply analysis. When the number of houses being offered for sale at a given price matches the number of houses wanted at that price, the market is said to be in equilibrium. If demand or supply change, the equilibrium price will change, too.

What could be the reasons for an extra 4.5

Million houses in the next 25 years?

There is excess demand for houses, because the UK has been under-supplying new houses for years, and this is because planning restrictions are very tight, and it is difficult to get permission to use land for more housing.

There are many reasons for an increase in demand. One of the reasons is the level of income that people have. The faster the level of income people earn, grows, the more money they have to invest in their houses (income elasticity). The overall level of income in the whole economy is known as GDP (Gross Domestic Product) and so if we look at the behaviour of the GDP we can see how the level of income on average has grown. The income elasticity of demand (YED) measures the responsiveness of a change in the quantity demanded to a change...