Introduction The learning of economics begins with the needs and wants of materials. Everyone needs basic things to live their life: food, air, water and shelter. With the advancement of science and technology people desires become more sophisticated, now they don’t need just food they need “ Dominos pizza” or “Mc Donald Burger”, they want to wear designer wears, they don’t like just a room to live in they want buildings or their own home. More the variety increases and become more refined, the economy becomes more composite too.
The study of supply and demand, basic concepts of economics is fundamental in today’s property market because even a single economic decision can change the market greatly. “The interplay of demand (the behaviour of buyers) and supply (the behaviour of sellers) determines the quantity of the good produced and the price at which it bought and sold. ” David Begg, 2005. The impact of Supply and Demand could be influenced by many factors. “Demand describes the behaviour of buyers at every price” (David Begg, 2005).
The demand in rental market increases to buy property if price goes down, however sellers will loss on their houses hence supply will decrease. If the price of property increases, consumers selling their property would make profit, increasing supply though unaffordability of consumer will make demand to fall. Housing Market in UK The housing market consists of buyers and sellers like in any other market who enter into an agreement for a price for a transaction.
Because we are so physically and emotionally attached with our home normal factors can take different heights of significance. For instance its supply is affected differently than other products because of its non mobility nature. In recent years UK Housing Market has been proven volatile due to many fluctuations in some market and constant in other. The house prices were 0. 4% higher than in March 2010 and 10. 1% higher than in April 2009, amounting to ? 207,516 adjusted average price on April 2010.
There was 0. 9% rise in UK house prices by the end of April 2010 when compared it with 4. 8% of quarter ending January 2010. The annual average prices of house in England climbed by 10. 9%, in Wales by 11. 3% and in Scotland by 2. 2% but Northern Ireland experienced great fall in house prices by -8. 9%. The annual average prices paid by first time buyers and former owner occupiers in April 2010 were 12. 2% and 9. 3% respectively were higher than they paid in 2009.
In the same year, annual average house prices paid for new properties were 7. 6% greater than the previous year. (Source: as per latest statistics provided by Communities and Local Governments on 15 June, 2010) House Prices: It is a barometer of the level of economic activity which indicates the state of housing market. A vibrant housing market encourage people to invest in a long term financial commitment and make confident that their salary would be enough to fund their properties and will be able to pay their mortgages on time.
This in turn acts as a stimulus for the rise in demand for houses assuming price inelastic of housing supply which subsequently led average price of a house to rise. House Price Inflation (%change): It is an indicator which helps to measure the average change in house prices over a given period of time usually a year. There is a number of factors that influence prices to fluctuate which we will discuss later. Annual House Price rates of change in UK (all Dwellings) Source: www. statistics. gov. uk UK| UK| All Dwellings| All Dwellings|
Year| Months| Index(not seasonally adjusted)Feb 02=100| % change over 12 months (not seasonally adjusted)| Seasonally adjustedIndex| % change over 1 month (seasonally adjusted)| ? not seasonally adjusted| 2009| Nov| 168. 5| 0. 5| 168. 9| 1. 7| 200,255| | Dec| 168. 6| 2. 9| 170. 3| 0. 8| 200,307| | Jan| 174. 3| 6. 2| 174. 0| 2. 2| 207,483| 2010| Feb| 171. 4| 7. 3| 173. 8| -0. 1| 203,991| | Mar| 172. 8| 9. 7| 175. 0| 0. 4| 207,517| | Apr| 174. 4| 10. 1| 175. 7| 0. 4| 207,517| From the figure above it is clear that the average UK house price rose by 10. 1 percent