MARKET HOUSING IN BRITIAN

Market Housing In Britian

Market Housing In Britian

UK economy and the housing market

Whilst some writers have argued that the housing market in the UK is directly linked to the UK economy's performance, there are others who have argued that this is not so much the case as many people think. Writers such as Spriging have argued that the housing market is so dominated by investors and wider buy to let developers that demand will be artificially high for a long time, thereby making it less reliant on conventional demand drivers (Spriging 2008 p.79). What is certain is that the key economic variable for the housing market is interest rates and the levels at which they are set will have a crucial impact on demand in the housing market because it will determine the cost of credit for most people. In the current situation these have been placed at some of the lowest levels in years, in order to try and stimulate the economy.

However, debates on this are now widespread, as many academics and professionals now believe that, for inflation to be controlled, interest rates should now be raised. Bank of England committee member Andrew Sentance argues that “The official Bank Rate has now been kept unchanged for the longest period since 1939-1951. And it is being maintained at an exceptionally low level. If we persist with this policy in the face of contrary evidence on growth and inflation, I see a growing risk of two unpalatable outcomes. Interest rates may need to rise much more sharply in the future, creating a severe jolt to confidence and the recovery. Or even more worrying, the Bank of England's commitment to the inflation target is seriously questioned by the financial markets, business and the public, and loses credibility. ” (Sentance 2010 p.1). Other writers such as Hasan have disagreed with this position, arguing that “Poll after poll shows voters across the EU care much more about the jobs deficit than they do about the budget deficit. Nonetheless, the proverbial Martian, landing in Brussels last week, would have been stunned to witness the complacency and indifference of the continent's political elites to the crisis of spiralling joblessness. EU leaders continue to fiddle - over borrowing limits, fiscal compacts, treaty changes - as their economies crash and burn. The austerity gamble hasn't paid off. Fiscal consolidation has failed to spur growth or boost employment.” (Hasan 2012 p.1). The outcome of this very political debate is likely to have a significant and important impact on the UK housing market in the years to come.

Key macroeconomic factors

Broadly speaking, the UK housing market is the same as any other major market in that prices are determined by the differing levels of supply and demand (Sprigings 2008 p.76). In the UK economy, there is evidence that the housing market has responded in a conventional manner to basic supply and demand theory in that as demand increases and supply remains the same, the price goes ...