O slideshow foi denunciado.
Utilizamos seu perfil e dados de atividades no LinkedIn para personalizar e exibir anúncios mais relevantes. Altere suas preferências de anúncios quando desejar.
Aspects of the UK Housing Market
Markets in Action
Aspects of the UK
Housing Market
The Demand for Housing
1. Real Incomes: As living standards rise, demand for most types of
housing increases
2. Mortgage I...
The Supply of Housing
Housing supply is the flow of properties available at given price in a
given time period. Supply wil...
Price Elasticity of Supply of Housing
• Reasons for low PES
• Production time frame:
• It can take years for a
project to ...
Market Failure in Housing
Markets fail when they fail to reach a socially efficient/equitable outcome.
Information Gaps
(A...
Should Private Sector Rents be Capped?
Discuss the view that a maximum rent should be set for all privately
rented housing...
Analysing / Evaluating Policies to Raise Housing Supply
Policy options Analysis Evaluation
Builders given tax incentives t...
Get help from fellow
students, teachers and
tutor2u on Twitter:
@tutor2u_econ
Tutor2u
Keep up-to-date with economics,
resources, quizzes and
worksheets for your economics
course.
Próximos SlideShares
Carregando em…5
×

Tutor2u - Aspects of the UK Housing Market

17.343 visualizações

Publicada em

Housing is a crucially important industry in the economy. Directly and indirectly it employs huge numbers of people and accounts for a sizeable percentage of the value of GDP. In microeconomics we are asked to apply supply and demand concepts in understanding price differentials and price changes. The UK housing industry is widely regarded as a cause of several market failures and there is structural shortage of affordable properties in both the owner-occupied and rented sector. Can appropriate government interventions improve the outcome for consumers and producers or might they lead to instances of government failure. This is a good market to apply your AS micro theory!

Publicada em: Economia e finanças

Tutor2u - Aspects of the UK Housing Market

  1. 1. Aspects of the UK Housing Market
  2. 2. Markets in Action Aspects of the UK Housing Market
  3. 3. The Demand for Housing 1. Real Incomes: As living standards rise, demand for most types of housing increases 2. Mortgage Interest Rates: A rise in mortgage rates increases the cost of financing the loan on the purchase of a property. 3. Consumer confidence. If people become less optimistic about they may be tempted to delay a property purchase 4. Economic Growth: When the economy has sustained growth and rising prosperity, housing demand and prices tend to rise 5. Unemployment: If unemployment is high, incomes are lower and limiting the number of people who are able to afford properties. 6. Price of Substitutes: For people wanting to buy their own home, the main alternative is to rent – so a higher cost of renting could lead to an increased demand for owner-occupied homes The demand for housing is the quantity of properties homebuyers are willing and able to buy at a given price in a given time period
  4. 4. The Supply of Housing Housing supply is the flow of properties available at given price in a given time period. Supply will be a mix of new and older housing • The main conditions of supply in the housing market are: 1. Costs of production for construction companies – Employment costs (including wages, overtime payments and employment taxes). – Costs of purchasing land for housing development. – Costs of purchasing building components and raw materials. – Costs associated with achieving planning consent 2. Number of construction companies and their objectives. 3. Extent to which property builders achieve economies of scale 4. Amount of innovation achieved in the house-building industry 5. Government taxation and subsidy of new housing developments 6. Government spending on the building of new social housing
  5. 5. Price Elasticity of Supply of Housing • Reasons for low PES • Production time frame: • It can take years for a project to be completed • Delays in the housing planning process • Limited spare capacity and low stock levels: • Supply is often restricted by shortages of skilled labour such as bricklayers, electricians & plumbers • Other factor inputs used in construction such as cement, bricks may be in scarce supply Price Quantity of Housing P2 P1 Q1 S1 Q2 D1 D2 The supply of new housing is inelastic in the short run. Therefore, house prices are determined mainly by demand factors
  6. 6. Market Failure in Housing Markets fail when they fail to reach a socially efficient/equitable outcome. Information Gaps (Asymmetric) Empty Housing & Homelessness Inequalities of Wealth (Widening Property Divide) Externalities in the building industry Labour Immobility due to high prices Chronic Under- Supply of Homes
  7. 7. Should Private Sector Rents be Capped? Discuss the view that a maximum rent should be set for all privately rented housing in the UK Qty R1 Q1 D Rent Ceiling Rent Q3 S Q2 • Rent ceiling must be set below private sector rents to be effective • It makes rented property more affordable for some tenants. • This may help to reduce inequality and prevents exploitation by profiteering landlords • But it creates excess demand for rented property. Fewer private landlords see renting as profitable and the rented housing stock falls (creating more shortages) • Illegal markets may develop in the rented property market. • Much depends on the severity of a rent cap – the impact will vary across regions (e.g. London versus Wales)
  8. 8. Analysing / Evaluating Policies to Raise Housing Supply Policy options Analysis Evaluation Builders given tax incentives to build new houses Increases profitability from construction – stimulates investment Might be more effective to tax undeveloped land – i.e. reduce “land banks” Simplify planning process Shortens the time frame for building Might cause worsening quality of new estates Loans to building companies backed by government A form of subsidy to encourage investment Likely to be expensive option (short term policy) End affordable housing requirement for new build estates Builders can charge higher average prices – stronger profit motive Big problem is affordability – more luxury homes built? Targeted government funding of skills training Expands the human capital available to the construction sector Will take several years to have a significant effect Build a lot more social housing / affordable homes Fund councils to build more affordable homes More council houses might hit average house prices
  9. 9. Get help from fellow students, teachers and tutor2u on Twitter: @tutor2u_econ
  10. 10. Tutor2u Keep up-to-date with economics, resources, quizzes and worksheets for your economics course.

×