Table of Contents
2.0 Current situation of prices of houses in the UK.
3.0 Factors that determine the prices of houses in the UK from 2006 to 2016.
3.1 Interest rate.
3.2 Supply of Housing.
3.4 Economic growth.
3.5 Unemployment rate.
3.6 Affordability of house.
3.7 Socially rented housing.
4.0 Impact of government schemes on the UK housing market
The economic condition of a country definitely determines the business and its environment in every sphere of business activities. After the declaration of leave from the EU, the economic conditions have been shocked in some cases. Thus, business institutions and their performances have been getting lower than the before EU engaged period (Financial Times, 2016). A report published recently showed that United Kingdom housing markets are in trouble to continue their business for the last twenty years. Because, the markets have faced high inflation rates and at the same time the authority cannot afford to decrease the trend in house price earning, cope with demographic changes, choices, and economic instability. Firstly, this paper outlines the factors that control housing prices in the UK from 2006 to 2016. Secondly, it examines the impact of the UK government on this market to develop the market.
2.0 Current situation of prices of houses in the UK
In accordance with the Halifax Housing Price Index (2017), it has increased by 5.1% of house material prices of the first quarter by 2017 compared with 2016. This was decreased by 5.7% by 2017 which was lowest since 2013. This index shows the rate is 1.7% higher than the previous quarter. The house price is raised by 0.1% in the UK. On the other hand, the ability of a mortgage has risen by 18% as of 2017.
Figure 1: UK House Prices-2017 Source: Halifax House Price Index (2017)
A report published by Nationwide Building Society (2017) revealed that the inflation of annual house price was 5.3% in 2016. UK presented the materials of the housing market which is very expensive in the marketplace of UK housing. In 2016, the regular house price was £198,564 in the UK. On the other hand, the regular price was £4312 in 1969 which was developed at £10,388 in 1975 and £22,676 in 1980. On the other hand, the costs of houses in the UK are increasing greatly rather than inflation. The average costs of the house were £83,126 in 1975 which is increased to £188,810 in 2014 by presenting a 126% rate.
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Charts 2: UK House Prices since 1991 Source: Nationwide Building Society (2017)
3.0 Factors that determine the prices of houses in the UK from 2006 to 2016
3.1 Interest rate
Obviously, the interest rate controls the housing prices in the UK housing market. It has significant role-playing in the housing market in England. If there is a simple interest rate buying a product or service, the buyer feels relax to buy that product (Nguyen, 2017). This enables the buyer to buy more products and housing appliances within his means. According to Pettinger (2016), dramatic changes have been observed in the interest rate since 1990 which was remained constant from 2009 to 2016. The chart below revealed the lending rates, base rates, and mortgage rates have been changed by the bank since 2006.
Chart 3: UK Lending Rates Source: Nationwide Building Society (2017)
A report published by Nationwide Building Society (2017) shows that the average interest rate increased in 2006 as well as decreased in 2008 which rate was 5%. After that, the rate of loaning and mortgage was near 7% from 2006 to 2009. This is created because of the cut of 5% interest rate by the bank in 2009. These decreased lending rates, disposition of bank rate, and rate of mortgage present optimistic marks for the housing market, potential customers, and owners of the UK. The lower interest rates, mortgage rates, and bank lending rates offer the buyers to buy the house than before the period in the housing market of the UK. But the prices of residential property have been made upturn since 2009. In 2009 the average price for residential property was £50,000 but it increased double in 2017 and was £100,000 (Halifax House Price Index, 2017). This report proved that the interest rate by the bank greatly impacted the economy of the UK housing market.
Chart 4: Residential Property Transactions Source: Halifax House Price Index (2017)
3.2 Supply of Housing
According to the Nationwide Building Society (2017), the construction rate in the UK has significantly increased in the housing market supply from 1950 to 2010. During the 1960s, about 400,000 homes were constructed in the country by the year whereas after the 1980s the number of construction has decreased as the controls of housing were left to the private sector instead of the government. The supply obviously declined the house construction by the strict rules and legislation by the authority. The supply of houses has fallen importantly in the 2010s comparison with the previous decade. The government wanted to build up an average of 240,000 houses in a year till 2016 but the private authority reduced the number the homes to 100,000 in case of a global downturn and credit crisis that year………………..