Factors that affect the demand and supply of houses

Factors that affect the demand and supply of houses Introduction The past couple of years have seen dramatic fluctuations in the demand and supply of houses. It has been observed that movement in house prices is a balance of the quantity demanded and supplied. In this essay, we first look into the factors that affected the prices of houses in UK in the past three years. Then, we will discuss factors that affect the sizes of elasticities of demand of houses. Factors affecting demand of houses The table below shows the various factors that affect demand of houses. Table 1: Factors affecting demand of houses. S. no. Factor Trend Reason Change in the demand curve 1. Affordability As affordability of houses increases, demand for houses increases and vice versa. Because when the price of houses goes down more people can afford to buy houses. Movement along the demand curve. FIG. 1 2. Disposable Income As the disposable income of the people increase the demand for houses increases and vice versa. People tend to buy houses when they have sufficient disposable income with them so that their weekly budget is not affected significantly. Shift in the demand curve. FIG. 2 3. Economic Trends If the economy is booming, then there is a net increase in demand for houses. Similarly, in case of a recession, the demand for houses decreases. A booming economy means a good overall health of the economy which translates into greater demand of all goods. Shift in the demand curve. FIG. 2 4. Supply of substitutes If the supply of substitutes such as rented accommodation decreases, then there is a net increase in demand for houses and vice versa. If the supply of rented accommodation is less, then there is an increase in the price of rented apartments. Therefore, in the long run people find that it is cheaper to buy houses than to live in a rented accommodation. Hence, then they will tend to purchase a house. Thereby, increasing the net demand for houses. Shift in the demand curve. FIG. 2 5. Availability of mortgage finance If the mortgage finance is easily available then this results in a net increase in demand and vice versa. This is because it is easier for people to arrange for money to finance their houses. Shift in the demand curve. FIG. 2 6. Interest rates If the interest rates are high, then there is a net decrease in demand and vice versa. This is because at higher interests rates people will have to shell out more money to repay their loan. As people have a fixed monthly income, a higher interest rate would mean that the loan instalment would form a higher portion of their monthly income. Thereby, decreasing the demand for houses. Shift in the demand curve. FIG. 2 7. Consumer confidence As consumer confidence in the housing market increases, the demand for houses increases and vice versa. If prices of houses are expected to rises then consumers think it is profitable to enter the market. However, if the prices fall or remain static then consumers find no urgency to enter the market. Shift in the demand curve. FIG. 2 8. Demographic factors As increase in immigration, number of divorces, life expectancy, results in an increase in demand for houses. An increase in immigration, number of divorces, life expectancy will result in more people needing independent houses. Shift in the demand curve. FIG. 2 9. Inherited wealth An increase in number of people inheriting a huge wealth would result in an increase in demand of houses. Because these people have more money to spend on luxury products, such as houses. Shift in the demand curve. FIG. 2 10. Tax benefits If people receive greater tax benefits by buying houses, then this would result in a net increase in demand for houses. This is because people prefer to use their hard earned money on themselves rather than paying it to the government. Shift in the demand curve. FIG. 2 Source: Nationwide, Besanko et. al 2007 FIG. 2: Shifting of the demand curve. D D Price P1 Q2 Q1 D D Quantity FIG. 1: Movement along the demand curve. Price P1 P2 Q2 Q1 D D Quantity Factors affecting the supply of houses The table below shows the various factors that affect the supply of houses. Table 2: Factors affecting supply of houses S no. Factors Trend Reason Change in supply curve 1. Price If the price of houses increases then there is an increase in supply of houses and vice versa. Because sellers can then sell houses at higher rates thus making more profit. Movement along the supply curve. 2. Cost of building a house If the cost of building a house increases then there is a net decrease in supply of houses and vice versa. As this would mean a larger initial investment for the builder. Shift in the supply curve. 3. Government regulations If government regulations are inclined towards building/selling of houses then there is a net increase in supply of houses and vice versa. This would mean lower costs from the perspective of a builder/seller, which would result in more building/selling of houses. Shift in the supply curve. Source: Nationwide, Besanko et. al 2007 FIG. 1: Movement along the Supply curve. Price P1 P2 Q2 Q1 S S Quantity FIG. 2: Showing shifting of the supply curve. S S Price P1 Q2 Q1 S S Quantity Factors that have led to changes in the prices of house in UK over the last 3 years Source: Nationwide FIG. 5: Average house rates in UK from 2008 to 2010 During the first half of 2008 there was a 5.1% drop in house prices. With the financial crisis and a looming economic recession this price fall was expected. This was evident from the clear change in the consumers housing market sentiments, with people being more reluctant to buy houses. It should be noted that there is a direct relationship between the demand of houses and the confidence consumers have in the market (See table 1). In addition, factors such as high mortgage rates, tighter lending criteria, and higher interest rates affected the house prices in early 2008. The fall in demand from the buyers was also due to the rise in unemployment and associated job insecurity. Further, the problems in the credit market led to tighter lending conditions which made it difficult to obtain loans at higher loan-to-value ratios. However, these strict rules were predicted to lead to a more stable housing market. FIG. 6: Consumer House Price Expectations and House Purchase Approvals An anomaly in this trend was the slight increase in the prices in June and July 2008. This was probably because the suppliers had responded to price decline by reducing the supply of property. The reduced supply combined with an increased demand from potential buyers, who had been priced out previously, translated into a slight price rise of houses. In addition, the slight increase in prices was because of latent demand for houses. Earlier, due to the banking crisis there was reluctance among buyers to purchase houses. However, once the buyers saw that the government was taking corrective actions to stabilize the banking system, they re-entered the market along with the added assistance of low interest rates. (Nationwide, 2008) However, this was a mere aberration and between August 2008 and March 2009 the house prices fell by 10.1% due to the overall lack of consumer confidence in the economic and market conditions. In addition, there was an additional supply of houses from homeowners, whose financial positions were impacted by higher unemployment and lower income levels. FIG. 7: UK GDP and House Price Growth between 1985 and 2007 With UK slipping into recession, even drastic cuts in interest rates didnt help in increasing the demand for houses. The reduced access to credit resulting from the financial crises catalysed the fall in prices. Then, a combination of initial fall in prices, widespread news of financial turbulence, and slowdown in the real economy prompted consumers to expect further price falls. As consumers expectations turned negative, the incentive to enter the market reduced and this led to a sharp price fall. (Nationwide 2008, 2009) Then in June 2009, the low interest rates and extension of stamp duty holidays were welcomed by borrowers as they reduced the costs of already high priced housing market. Further, notwithstanding the economic downturn, there was a notable shift in house price expectation from negative to positive. These two factors resulted in increasing the demand for houses and thus increasing the price of houses. (Guardian 2009, Nationwide 2009) The second half of 2009 was marked by rebound in house prices. This was contributed by the better than expected performance of the labour market. Even though workers were forced from full-time to part-time work resulting in a reduction in income, the impact was less severe than if they had lost their jobs completely. In addition, reduction in mortgage rates meant that fewer borrowers had fallen into arrears than expected. This led to lesser number of second-hand properties being on sale and thus stabilizing the housing markets. (Nationwide 2009) The first half of 2010 also saw a 4.1% rise in prices of houses. An important factor of price rise during this period was the low level of stock for sale as many homeowners and buy-to-let landlords preferred to wait for prices to rise. And this approach was supported by the very low levels of interest rates. As a result, many potential sellers could easily afford to wait for prices to recover further before they decided to sell. Between July and October, there was a fall in the prices of houses. The impact of increasing capital gains tax from 18% to 28% was seen in the housing market, with many second homeowners choosing to sell them in response to the tax increase. Further, the spending cuts by the new government had clearly put a pressure on the disposable incomes of households. As a result there was a decrease in the prices of houses during this period. (Nationwide 2010) Factors that affect the sizes of different elasticities of demand for houses The responsiveness of the quantity of houses demanded to the change in prices, income, price of other goods, etc. is measured by the corresponding elasticities, i.e., Price elasticity of demand of houses, Income elasticity of demand of houses, or Cross prices elasticity of demand of houses. Factors that affect the sizes of different elasticities are as follows: Availability of substitutes: It is observed that more the number of substitutes, more elastic the demand will be. If the availability of rented accommodations is high, then a slight price rise will result in a large change in demand for houses because people will prefer to live in a rented apartment than to buy a house. Therefore, making the demand for houses elastic. On the other hand, if availability of rented accommodations is low, then even a large change in price would not affect the demand because everyone needs a place to live. Therefore, the demand for houses will be inelastic. Importance of the good in the consumers budget: Expenditure on housing, according to R.K. Wilkinson (1973), is an outcome of three sets of influences on the consumer, i.e., their needs, their aspirations, and their ability to realize their needs and aspirations. The latter is measured by the consumers income and the two former qualify the way in which income and changes in income affects housing expenditure. If there is a need for a house and consumers have the ability to realize that need, then the demand of houses would be inelastic. In contrast, if there is no real need and an aspiration to buy a (bigger) house combined with no real income to realize that aspiration, then the demand for houses will be highly elastic. Time: It was observed by Hanushek and Quigley (1980) that the demand for houses is elastic in the short-run. However, in the long-run the demand tended to be inelastic. This was because higher prices dissuade buyers to buy houses in the short-run. However, in the long-run he may realize that the price of houses will rise and thus he finds it better to buy a house. Conclusion In this essay we determined the factors that affected the prices of houses in UK during the last three years and the various factors that affect the elasticities of demand of houses. Based on the above discussion, I think consumer expectation of house prices is one of the most important drivers of prices in the short-run. As for the long-run, the drivers of house prices are the economic conditions, the fiscal policies, and supply of houses.

Departments of Culture Essay

January 2009 was highlighted by delivering of long awaited the interim report â€Å"Digital Britain† issued by British Government. Summarizing the ideas expressed by Lord Carter, there is a need to underline that one of the main report’s strategies is focused on 2 megabit per second broadband connection establishing â€Å"in every British house† and weakening of BT’s obligations (USO). The report is definitely constructive due to its context; however it experiences the lack of details in the important fields. For example, in the sphere of funding, Lord Carter skipped the argumentations to minimum (Carter, 2009). The presentation of telecom sphere as a survivor at the time of economic slowdown is one of the strongest and the most attractive ideas. The presentation is followed by twenty two recommendations for modernization and industry upgrade provided. The demand for comprehensive and genius reconstruction reform for Digital Britain appeals throughout the text of report. Despite this fact, I’ve got an opinion that demanding for such crucially important changes; Lord Carter hasn’t the desire to open the secret how the process should look like. The innovations’ line offered within interim report envisages the utilization of BT’s duties on universal access to phone lines with shared obligation for broadband providing. It’s a chance for mobile operators to get the better role in providing everyone with broadband access. Certainly these changes need the new respectful law to regulate the rights and obligations of providers at all levels. This is quite new approach to the law of copyrighting, so the additional consultations among distributors and rights holders are to be organized. Building of Financially Healthy Environment for British Digital Network Modernization Nowadays, when Britain suffers from the severe recession’s circumstances the basis for economy development and support in the tomorrow competitive world is necessary. Long ago, railways and roads became such sort of instrument for Britain. Today, broadband network has all features to become the basis for new economic environment building and support. It can provide the opportunity for British Government to step aside from financial sector and open the new door. In order to receive a positive outcome tomorrow the investments in the sphere upgrading and modernization are ought to be done today. Comparing with the rest of European Community Britain stays two steps behind in this progress. The close neighbours such as Ireland and Portuguesa have already made additional investments in rollout projects in the sphere and the tenders were announced accordingly. Ideally, the actions need to follow just after Stephen Carter’s constructive report has been issued. Practically, there will be several more reports to follow across the Departments of Business, Enterprise and Regulatory Reform, as well as the Departments of Culture, Sport & Media. There is a high risk at current stage to bury the reconstructive offer in follow up reports and consultations instead of real time actions. Actions to be taken – their impact on modernization process The obvious value of report for modernization and upgrade changes and their implementation is approved and acknowledged by issuing the new Wireless Spectrum Modernization Program. This program allows resolving the disputes between mobile operators and finding the compromise for mobile broadcasting with further activities development start approximately in the beginning of summer, year 2009. Spectrum modernization is crucially important for USO (Universal Service Obligation) issues resolving. Stephen Carter stresses on the level of attention to be paid to current problem today and the required steps on its resolving and upgrading to the next level, which should be competitive up to EU services standards. Modernization and upgrade of British Government digital policy isn’t possible without taking into consideration every announced objective published by Lord Carter in interim report. The mentioned objectives are focused on the overall UK digital network modernization along with attraction of additional investments in the sphere. The content that is going to be chosen should be beneficial and interesting for the major part of UK citizens. Modernization of UK digital network isn’t possible without unification of all broadband services delivered throughout the UK within the enhancement of quality of delivered services.

Lord of the flies essay - 562 Words

Lord of the Flies Project nbsp;nbsp;nbsp;nbsp;nbsp;â€Å"Breakdowns in society result when people avoid their responsibilities to the community to pursue their own ends.† This seems entirely true. For example, in â€Å"Lord of the Flies† most of the kids decide going around hunting and not worrying about anything else is what is important, and eventually turn into savages. This could also be true if the people of a farming community started becoming lazy and stopped caring for their crops and animals. Or, in the military, if the all the leaders just stopped giving orders. Anyway you want to put it, if people don’t do what’s required of them, the world around them crumbles. nbsp;nbsp;nbsp;nbsp;nbsp;In William Golding’s â€Å"Lord of the Flies†Ã¢â‚¬ ¦show more content†¦nbsp;nbsp;nbsp;nbsp;nbsp;Another example would be in a farming community. There would be a certain numbers of farmers each growing different things, and using the others resources to get whatever they don’t grow, thereby coexisting with each other. Say some of the farmers raised livestock, others grew vegetables, and the rest grew wheat and fruits. Should any one group of them suddenly stop making whatever they made, the other farmers would be short that resource, and would have to divide that extra work among themselves, which would bring down the quality and amounts their original products were made in. Slowly, they would each most likely have to break of from this group, and begin working on many different areas, in hopes that they could sell this now wide array of products in larger areas. nbsp;nbsp;nbsp;nbsp;nbsp;A third way to put it would be in the sense of the military. People rely on those of higher ranks for their orders. Should their leader not give out those orders, the consequences could be dire (because the person on lower rank now giving the order would have less experience and probably less knowledge of whatever problem may arise). Or, should someone be giving a group of low rank men orders via radio on a covert ops mission, and suddenly decide to leave the radio unattended while he goes to the bathroom, the group of men would probably die. nbsp;nbsp;nbsp;nbsp;nbsp;So, as you can see, as long as societiesShow MoreRelatedLord of The Flies Essay1673 Words   |  7 PagesLord of the Flies was published in 1954 by William Golding. Today Lord of the Flies is a well known literary criticism. Many schools require their students to read Lord of the Flies because of the literary criticisms in the book. In this paper three themes or literary criticisms are talked about: good vs. evil, symbolism of characters, and maturity of characters. Another topic in Goldings Lord of the Flies is the battle of good vs. evil. Everything seems to start out just fine on the island; theRead MoreLord of the Flies Essay523 Words   |  3 Pages Lord of the Flies Essay â€Å"Ralph wept for the end of innocence, the darkness of mans heart and the fall through the air of the true, wise friend Piggy’(Golding 202). Peter Brooks movie and Golding’s novel, Lord of the Flies, express the idea of evil in human nature and through the evils we see the boys on the island change over time. Both the movie directed by a Peter Brooks and the novel written by William Golding demonstrate the defects of human nature through the characters dialogue andRead More Lord of the Flies Essay1446 Words   |  6 Pagesbe symbolic of the tangible as well as the non-tangible. In addition, characters can often be looked at with a psychological approach to literature in order to better determine or understand their symbolic significance. In William Golding’s Lord of the Flies, special symbolic significance may be found in the characters, Piggy, Ralph, and Jack. nbsp;nbsp;nbsp;nbsp;nbsp;Piggy, the heavy, asthmatic, nearsighted boy, was often teased and ridiculed, however Golding made it obvious to the reader thatRead MoreLord Of The Flies Essay819 Words   |  4 PagesPranti Ahmed Blue 4 British Literature February 16, 2015 Lord of the flies Individual Essay Many critics argue that the book â€Å"Lord of The Flies† portrays too much of a frightening side of human nature and young people should not be exposed to such things nor should they be expected to understand it. While it is true the book has a rather gruesome/violent tone that’s no justification in depriving young people of any book at all. The only way anyone is able to understandRead MoreLord of the Flies Essay2000 Words   |  8 PagesLord of the Flies Essay The Power and Theme of the Conch Shell The novel; â€Å"Lord of the Flies† is a highly renowned novel written by William Golding and published in 1954. The novel embodies many themes and events that are mysterious and unanticipated for the reader. During the course of the essay I will explain how the conch shell that is found at the foundation of the first chapter plays a significant role throughout the novel and how diverse themes are brought on from this influential shellRead More Lord of the Flies Essay1591 Words   |  7 PagesLord of the Flies The main theme of Lord of the Flies is that moral nature is not instinctive in mankind. There is a capacity for evil in all people, and their morality is superficial. Nonetheless, it is this moral integrity that must continue in order for a person to be ethical, for society to be maintained, and to keep society from falling in on itself. Society holds everyone together. Without the rules and the structure, evil in everyone becomes more prominent, and ideals, values, and basicsRead More The Lord of the Flies Essay1220 Words   |  5 PagesWilliam Golding’s masterful use of symbolism is exemplified in his book Lord of the Flies, in which he uses masks to represent . These masks come in many forms, and by careful study of events throughout Golding’s novel, one discovers their significance. Physical masks are used by many characters such as Jack and Piggy, and they are perhaps the least ambiguous forms found in the book. The idea of a mask encompasses more than just the se literal interpretations, however. Metaphorical masks are usedRead MoreLord of the Flies Essay1218 Words   |  5 PagesThroughout the novel Lord of the Flies, various views and motifs are portrayed. Of these views and motifs, the main message which is illustrated is one that questions society. It is clear from the very beginning that is a message conveyed in this novel. On the whole, Golding is portraying a good versus evil which are represented by Jack and Ralph. In Lord of the Flies a variety of ideas can be extracted on what the message Golding is trying to show. Golding wrote this novel in order to show the basicRead MoreEssay on Lord of the Flies694 Words   |  3 PagesLord of the Flies Society frees the individual from the tyranny of disorder. When people are working together with rules, chaos does not occur. In Lord of the Flies, the shell signifies society and order. The book begins with Ralph and Piggy blowing the conch to call the other boys together to order and unity. Skinner explains this by people being completely controlled by their environment. The conch is similar to a bell at school where the boys instinctively come after hearing the noiseRead MoreLord of the Flies Essay1446 Words   |  6 PagesLord of the Flies Comprehensive Test True/False- Mark â€Å"A† for True and â€Å"B† for False. 1. When Ralph is elected chief, Jack is so frustrated that he refuses to hunt. 2. Ralph starts the signal fire by rubbing two sticks together. 3. The signal fire goes out because Jack and the hunters neglect it. 4. A wild boar eats the littlun who has a mulberry-colored birthmark on his face. 5. Piggy’s parents will come find them. 6. The conch provides a symbol for authority that the

Analysis Of The Tale Of Hecuba And Medea - 1327 Words

In both of Euripides’s plays Medea written in 431 BCE and Hecuba written in 420 BCE. shows the extent that a person would go to get revenge yet, both women had distinct reasons behind it. This paper will examine their reasons and beliefs that overall lead the two women to act against the people who hurt them. At the same time showing the differences between the two character’s crimes as well as their similarities. Therefore, examining what might be the significance behind their acts, did their perpetrators deserve it. Did these vengeful acts have a deeper meaning that Euripides was trying to prove to justify these women’s acts? Another factor is the societies these women lived in which happen to be controlled by men. The crimes that were†¦show more content†¦Hecuba’s story of revenge begins when she becomes a slave after losing her kingdom, Husband and Son during the Trojan war. Hecuba’s grief didn’t stop at the loss of her son. Hec uba after becoming a slave to the Greeks received news that as a request to â€Å"Achilles’ demands are just. By majority vote, they have sentenced your Polyxena to death. A sacrifice to Achilles’ honor.† (Hecuba 130-133) However, as Hecuba griefs the death of her daughter Polyxena, she is overwhelmed when she finds out her youngest son Polydorus was killed for his gold by someone she trusted. â€Å"...Took up his dagger. He cast my body into the sea. For gold he did this;† Therefore, giving Hecuba a reason to seek Revenge. She uses the help of other Greek slaves to carry out her plan to make Polymestor pay. In front of Polymestor Hecuba kills both his child and leaves him blind so he can always remember seeing his children die. Revenge is always hard to find when it comes to getting justice for a loved one but when people choose to take upon their selves to seek it, would it be considered a crime or a justifiable act. â€Å"We will see that people were pretty good at making trade-offs, at weighing and balancing harms, pains, suffering, benefits, favors, and human worth, at measuring eyes and teeth, arms and legs, this person’s life against that person’s. Although paying back, getting even, and revenge are often the