Relationship Between The British Economy And Housing Market Economics Essay

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There are various types of dwelling and of tenure in the UK housing market. Dwellings include houses and bungalows (detached. Semi-detached and terraced), flats, maisonettes and mobile homes. Some are owner occupied, either owned outright or with a mortgage. Others are rented, from either the public sector (the council or a housing association) or the private sector (furnished or unfurnished). Ownership and rental are forms of tenure. [1] 

The housing market takes a significant role in our life. It has an extraordinary influence on people's living standards, and changes in the housing market affect the national economy. It is same for the British economy which is suffering from recession and the aftermath of a bubble in the housing market mjl2112010-08-25T17:09:00

Can you explain what you mean? Perhaps you could transfer this idea to the main body and develop it? Hence, it is necessary for all stakeholders to understand how the British economy affects housing, so as to facilitate their decision-making.

Based on the nature of the housing market in UK and the British economy. This essay will illustrate in the following four important points or aspects of the relationship between the housing market and the British economy, and explain how the changes in the past and recent British economy affect the UK housing market and the population at large..

Changes in the pattern of tenure and the British economy

In recent decades there have been major changes in the pattern of tenure in UK. One of the most significant is the growth in owner occupation and the decline in renting. Between 1960 and 2006, the number of the British owner-occupied dwellings more than doubled to 17.1 million and the number of rented dwellings fell by a six (Survey of England Housing, Department of the Environment, Transport and Regions) It seems that individuals much prefer to have their houses than renting houses. It may due to the fears for the present British economic downturn and for the future life that they will not have the appropriate ability to buy a house.

In the social sector there has been a decline in council rented accommodation. At the same time there has been a rise in rented accommodation provided by housing associations which are providers of low-cost housing for people in the UK who cannot afford to buy their own properties. [2] 

Unfinished…(I may want to add some more..)Yes

Demand and supply in housing and the British economy

Demand for houses is influenced by several factors. The most important way in which the housing market reacts with the wider economy is through household spending or consumer demand. A paper by staff at the Bank of England mjl2112010-08-25T17:19:00

Which? Can you make this a more formal reference? Have you bought the £1 book from BLACKWELLS?indicated that house price will be influenced by demand.(Bank of England working paper No. 271) Although UK had period of time when her people were crazy about mjl2112010-08-25T17:12:00

Could you increase formality?buying houses and housing suppliers provided a large number of houses to meet the needs of consumers, it seems that this is only short-term consequence of rapid economic growth. There is no long-term benefits at all. It is widely acknowleged that when an economy is at its maximum capacity with all resources employed, any increases in aggregate demand will be purely inflationary. It is same for current UK demand and supply in housing situation. British stakeholders are confident about future economic prospects, they tended to increase their spending. In an attempt to meet the higher aggregate demand, firms compete for resources, and the price level is pulled. Then it leads the British economy into "demand-pull" inflation. [3] Manufacturers expanded production after inflation to the point that exceeded market demand and led to a dramatic fall in UK housing demand and the price of houses. Householders worried about the future development of UK housing market, and they thought that the current situation would persist in the next few years. It is a truth that inflation has harmful effects on stakeholders living standard and housing market. Individuals are seeking to bring purchases forward or pressing for high wage rises just to maintain real wagesmjl2112010-08-25T17:16:00

This paragraph is difficult to read. You seem to have a good topic sentence if you want to discuss the factors. Could you signpost the factors clearly and then have a concluding sentence which evaluates those factors or emphasizes the links?.

House price and the British economy


How does the last section link to what you are going to write about now? Can you make this clearer? prices of houses and other dwellings change with a country's economy . In the 1980s, increased competition between Britain;s banks, building societies and other financial institutions to provide loans and rising incomes led to a rise in house price. This accelerated in 1987 and 1988, when financial institutions were lending more than five times annual earnings, unemployment was falling and expectations were rising. Between 1989 and 1993 average house price fell by 8%. [4] These numbers and information make it clear that a large numbers of communities which got caught in a negative equity trap [5] mjl2112010-08-25T17:17:00

It is a better idea to include definitions in the text rather than footnotes., with their homes being worth less than they owed on their mortagages.

However since 1996 nominal house prices in UK have risen by around 180% and by about 150% after accounting for general inflation, while the British has enjoyed continual growth since 1993. [6] Hence those who own houses will see an increase in their wealth. This is likely to grow their confidence, thereby causing higher levels of consumption for goods and service. Higher levels of consumer spending lead to a rise in aggregate demand and higher economic growth. The effect of rising house prices can be quite significant in determining economic growth. UK house prices over the past few years has shown an upward trend. since 2007 the price of the housing estate has been raising rapidly. [7] After 2007, due to the long term increase of house value and inflation there has been signs of the price decrease in the housing market. Cheaper houses seems to benefit British people, however it is not exactly like that. Falling houses price reduces consumers' wealth and leads to lower economic growth. For my awareness and concern, this phenomenon also ismjl2112010-08-25T17:22:00

I am confused about the main point and organization of this paragraph.


Market failure in UK housing marketmjl2112010-08-25T17:22:00


Link to the previous section? UK housing market is not economically efficient. Evidence of market failure includes the following.


Between 1979 and 2000 homelessness more than doubled, partly because of a decrease in house building by the public sector, the sale of council accommodation and a rise in private rents. Although there are more dwellings than households, there is still a national shortage of housing because some is lying empty, some is undergoing conversion and some is used as second homes. [8] More homeless people need more government support, which increases the ratio of government expenditure and spend less in other sectors. Obviously, homeless people do not have ability to buy or rent a house, it also strongly affects the housing market.

Lack of equilibrium

The housing market does not always move smoothly towards equilbrium because some people buy houses for the purposes of both consumption ( as places to live in) and investment (as financial assets). When demand for houses outstrips supply, price rises. The higher price, instead of restoring equilibrium, can push price even higher if it encourages more consumers to buy hoses in the belief there will be a financial gain. Similarly, a fall in house prices can lead to a downward spiral. Demand may fall as people switch from buying houses as investments to alternative financial assets. This can contribute to housing booms and slumps or economic booms and slumps.


The housing market is extremely important and it has influence on people's living standards, and also affects the national economy. All these can be seen clearly from the British housing market. When the economu is doing well, the housing market usually does well. Individuals are more likely to enter the housing market and to trade up to more expensive property when their incomes are rising and they are optimistic about the future. A buoyant housing market also promotes increases in national output. When community move home they may buy new curtains, carpets and white goods (such as refrigerators) and spend more on DTU materials. For most English people their home is their main asset, and higher house prices make them wealthier. It would appear that it encourages them to spend more and enables them to borrow more, as they have a more valuable asset to use as a security. However, the UK housing market has a downward trend, but it seems that it will continue like this for some time. There is still a long way to go, and just as many economists predicted.

The building society's research head Paul Sanderson said the slower activity reflected a significant weakening in demand from buyers since last summer, as decelerating income growth and the slowing in the economy eroded consumer confidence.