• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Three ways in which housing market affects consumption levels

Extracts from this document...

Introduction

Three ways in which housing market affects consumption levels Housing is a very strong component of wealth for typical household because many people's biggest asset is their house. It is believed that on average a 33% of overall wealth for a family comes from their house/houses. Houses are obviously very essential for living in and in the UK at least 95% of people own houses, however many people would not take into consideration that the price of their house will affect their consumption level and therefore overlook the fact that a house is more than just a building. One major way in which housing markets affect consumption is between house prices and consumption (wealth affect). ...read more.

Middle

the house prices will have fallen because of a recession or something similar along the lines of that and therefore peoples job security will diminish as they may be scared of losing their job. Another factor is inflation, which is a general increase in prices so a high inflation means high prices. This can be perceived in two ways: Firstly, expectations of increase in inflation will tend to bring forward their purchasing and thus increase consumption. They know that if they bought an expensive car or a flat now that in a month's time it will be worth more and so they will be wealthier and will want to consume more. ...read more.

Conclusion

An increase in interest rates will mean that once a loan is taken out, you will have to pay more money on these goods and so like inflation virtually means that the price of goods increase. Therefore households will lose confidence and cut their consumption. Interest rates also affects the mortgage and so increase interest rates means high mortgage repayments, and so directly cuts spending which discourages house owners from borrowing money and again reduces consumption. In my opinion the main housing market factor affecting consumption levels is the value of the house, because higher house prices means higher customer confidence and in turn means more consumption. It directly relates to consumption. ?? ?? ?? ?? Raju Mahajan ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Markets & Managing the Economy section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Markets & Managing the Economy essays

  1. Free essay

    experience of the housing market proves that market works. ECONOMICS

    demand for housing is equal to the supply and now, the demand for housing tend to be reducing which will cause a decline in the housing price. Excess demand puts upward pressure on price The Irish residential property market has experienced rise in house prices over the past few years (beginning in the 1990s)

  2. What Are The Effects Of Tescos Oligopolistic Market Structure, On Both Consumers And Producers?

    sales include many billions of wholesale turnover, and its retail turnover is much less than Tesco's. At 24 February 2007 Tesco operated 1,988 stores in the UK, and 1,275 outside the UK. The company has a total market value of about �36,761.71m (April 2007)

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work