Macroeconomic Factors Sample Essay

Estate agents organise the sale or rental of belongingss for commercial or residential intents. As belongings is a big outgo with long term committednesss from purchasers. a customer’s ability to purchase belongings will be mostly dependent on macroeconomic factors such as ; involvement rates. rising prices. unemployment. income and the concern rhythm.

Possibly the most important factor in finding the success of UK estate agents is the rate of involvement charged on mortgages. As houses are a big outgo few people can afford to purchase one outright. so most people rely on a mortgage to enable them to purchase. Mortgage rates are the per centum of the loan that a consumer has to pay to the loaner in return for the loan. Mortgage rates in the UK are influenced by base rates set by The Bank Of England. Presently involvement rates are comparatively low. This should hold a good impact on the success of estate agents as more people can afford to purchase houses. Having more possible purchasers encourages possible sellers to set their houses on the market so selling becomes easier. As estate agents work on committee. the figure of gross revenues is a cardinal factor in their success. If involvement rates rise. fewer people will be able to afford to take out a mortgage so fewer houses will be sold. This will hold an inauspicious consequence on the success of UK estate agents as they will hold depleted gross watercourses.

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Inflation is another important factor which determines the success of UK estate agents. Inflation normally occurs when a state prints more money than is justified by the country’s wealth. Inflation causes monetary values to lift each twelvemonth. the UK has an rising prices mark of 2 % . which is set by the Bank Of England. This is set to guarantee the economic system is stabilised. Presently the UK rising prices rate is 2. 7 % but RPI rising prices which includes lodging monetary values is 3. 1 % this is higher than ideal and may ensue in fewer people purchasing houses as monetary values are excessively high. This is because rising prices is non normally in line with wage additions. so people can afford to purchase less and less as clip goes on. For estate agents this is unfavorable as will sell fewer houses. have less committee and hence do less net income. or perchance losingss. Another thing worth sing is that any net income that estate agents do do is devalued by deflation as monetary values are lifting.

The effects of income on the lodging market are linked to rising prices. In the UK incomes have increased by 1. 4 % over the last one-fourth. which sounds good but in world it is still lower than rising prices. This means that people in the UK are gaining more money than before the international fiscal crisis but the money they are gaining is deserving less. The consequence of this is that people have a smaller disposable income so they can non afford to use big sums on houses and other luxury points.

The unemployment rate in the UK is presently 7. 7 % . Which is a 0. 1 % lessening from the old one-fourth but is still much excessively high. High unemployment means that fewer people are gaining and hence fewer people are able to afford to purchase a house. This causes a autumn in demand. Falling demand means that fewer people are viing to purchase houses so the house monetary values will fall. This means that estate agents will be selling fewer houses. at lower monetary values so their committee will be greatly reduced. This can take to hard currency flow issues in times of unemployment and if rates stay high over a long period of clip. ( eg in the current recession ) it could intend that houses have to take out big loans to stay unfastened.

The concern rhythm has a immense impact on the success of estate agents in the UK as in times of recovery and roar. building houses are constructing more houses and flats as they gain assurance and the demand is higher. this besides increases employment and hence incomes. In recession or slack phases there is less building. there are fewer new houses and even fewer people can afford them. This causes the lodging market to decelerate right down and gross revenues will drop dramatically.

The travel industry and the automotive industry are besides greatly affected by macroeconomic factors as they are expensive to purchase. Factors like unemployment and rising prices make it hard for people to afford to go or purchase a new auto. Many people purchase autos on recognition which means that involvement rates will besides hold to be considered by possible purchasers. If involvement rates are excessively high people are likely to purchase 2nd manus or maintain their current auto for every bit long as possible.

However newer. more expensive autos are monetary value elastic as consumers of these merchandises tend to be less affected by the recession and the associated macroeconomic factors. For illustration Jaguar Land Rover’s latest one-fourth retail gross revenues are up from the old two quarters. Rolls Royce reached a record ?1. 16bn net income in 2012. in the thick of asceticism.

Overall I agree with the position that macroeconomic factors determine the success of estate agents in the UK far more than they determine the success of concerns in other industries. However it is ever of import to see that about all industries are affected by macroeconomic factors.


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