housing

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Is the UK Housing Market set to Crash?

The Housing market is certainly a popular topic of conversation these days. There was a time when people felt that ‘house prices would always rise’ However, the sobering lesson of the US housing market is that house prices can fall, and when they do it can be very damaging for the economy. In some respects the UK is different to the US. We don’t have the same oversupply. Our mortgage industry  wasn’t so poorly regulated, interest rates are likely to fall in the next 12 months. However, there are several warning…

Economics of Building Houses

Economics of Building Houses

Readers Question: should the government build houses itself, encourage the private sector to build more houses, or play no part in the housing market at all? (justify your answer) Arguments for Government Building HousesHouse prices are currently too high due to a shortage of supply. If government increase the supply it will help overcome the shortage and keep houses affordable for first time buyers. If the government don’t build houses there will be a continual shortage and the market will be subject to fluctuations. Shortage acute in certain areas. The government…

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Recovery in Housing Market – Who benefits?

Readers Question: Which businesses are likely to benefit from a recovery in the housing market? I think it is a little premature to talk of a recovery in the housing market. But, nevertheless when there is a recovery in the housing market the following firms will benefit.House Builders. At the moment there is a surplus of unsold houses. This is contributing to falling profitability for many large homebuilders. A recovery in the housing market would benefit these firms very significantly. Mortgage Lenders. The Council of Mortgage Lenders in the UK have…

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Mortgage Equity Withdrawal and Economic Growth

Readers Question: Does mortgage equity withdrawal enhance economic growth? There is good evidence that mortgage equity withdrawal can lead to higher levels of consumer spending and economic growth Definition of Mortgage equity withdrawal – Mortgage equity withdrawal occurs when homeowners remortgage taking out bigger loans to take advantage of rising property values.Suppose you bought a house for £100,000 with a £95,000 mortgage. (+ £5,000 cash deposit) 10 years later the house might be worth £160,000. Yet, you only owe the remainder of your £95,000 mortgage. If the bank is still…

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House Prices and Consumer Spending in the Economy

Readers Question: in what ways can changes in house prices effect consumer spending, and hence an economy as a whole? The Housing Market places a crucial role in determining the state of the UK economy. This is because:Many consumers are also homeowners. (75% of houses are privately owned – higher than in European countries like France) Houses are by far the biggest form of wealth.What Would be the effect of falling House Prices on the UK economy? Confidence. The value of houses plays a big role in determining homeowners outlook for the…

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Government Policy and Supply of Housing

Suggest various ways in which the supply of houses could be increased in an economy and in particular, explain how governments could help the process? The UK housing market suffers from a shortage of supply. Last year, there was a record low in the number of houses being built. These are various policies to help increase the supply of houses. 1. Loosen Legislation about building on Green belt land. The government can make it easier for property developers to build on land protected by the environment. This makes it much easier to…

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Why House Prices in the UK are Falling 2008

The state of the UK housing market seems to get as much coverage in the newspapers as just about every topic, bar the latest escapades of Britney Spears driving through a traffic light. From inches of press coverage, it appears that a fall in the rate of UK house price inflation is vastly more significant than a cyclone in Bangladesh, claiming the lives of 10,000 people. Anyway, the evidence does suggest the housing market is slowing down. With several reports showing a fall in house prices in recent months. The first…

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UK House Price Crash?

Readers Question: Critically evaluate the argument for and against the likelihood of an imminent house price correction in UK ? House prices in the UK have risen much faster than inflation; in the past 6 years average house prices in the UK have more than doubled. This has caused many to speculate that house prices are overvalued and are likely to fall, in the near future, to more realistic levels. These are the arguments in favour of house prices falls. House prices have risen faster than average incomes. This has made it…