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The Evolution of House Price in the Uk and the Factors That Affect the Demand and Supply of Houses

In: Business and Management

Submitted By emelbeyoglu
Words 1826
Pages 8
Contents

1. Introduction 3
2. The evolution of house price in the UK and the factors affecting 3 supply and demand
3. The price and income elasticity of housing demand 9
4. Literature 11

1. Introduction
The aim of this study is to explain the changes in the prices of houses by shedding light on factors affecting the demand and supply of houses in the UK. Firstly, we will look at the evolution of house prices in the UK since 2006 and examine relations between house prices and output, employment and mortgage interest rate. Also, supply of houses will be discussed by noting changes in the number of new houses and factors such as land cost, building cost. Then, in the next section we will proceed to examine the factors affecting the sizes of different elasticity of demand

2. The evolution of house price in the UK and the factors affecting supply and demand
Over the last four decades, the UK housing market has been subject to boom/bust cycles and Stephens (2011) indicates that UK has one of the most persistently volatile markets in the world. Especially, since 1997 there has been a record growth in UK house prices.

The above chart indicates that there are significant fluctuations the in UK housing market. House prices experienced steady growth during both 2006 and 2007 and reached their peak in late 2007. As the end of the 2008, the average house prices had fallen by around 15% (Osborne, 2008). In 2009 prices rebounded by an impressive rate 8.9% since the beginning of the year and this brief recovery in prices continued until the end of 2010 (Gahbauer, 2009). During the last two years 2011/2012, house prices subdued eventually (Pawson & Wilcox, 2012).

Kim and Renaud (2009) said that “house prices are determined by a combination of

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