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

Housing Market: from boom to bust.

Extracts from this document...


Housing Market: from boom to bust. For the past seven years housing market was growing very rapidly. This increase caused the rise of rent equilibrium, and a price increase. Thus over the past 12 months, house prices in Britain have increased by about 30 percent. London market is certainly over-valued. This also could be a result of rising building and land costs. Therefore demand for property became lower, and banks were trying to maintain the housing market stability by offering low interest rates on borrowing partly driven by competition. The almost stable low inflation rate allowed them to do so. Consequently, a lot of homeowners were willing to sell property at higher price, thus the supply has gone up but less people could afford to buy. So increase in house prices draw the buyers in and encouraged owners to increase debts. ...read more.


Moreover, Sir Brian Pitman, the Master of the Guild of International Bankers, suggested that inflation rate is not going to rise dramatically, and with high employment level and quite stable interest rates house prices will remain unchanged. Thus, the consumer property debt should be covered soon. My personal point of view is that there would be a further downturn in housing market, but very slow. According to the Labour Force Survey( 2002) unemployment is rising, government financing are rapidly deteriorating, inflation is going up, as a result interest rates might increase, consumer property debt has reached the highest levels, which has influence on consumer spending and government depends on it very much. Inflation disrupts investment in housing market in particular and therefore affects the overall performance of the economy. Also this can lead to a further rise in unemployment as demand for houses will fall; less estate agents, builders etc. ...read more.


This should not be allowed. And as housing market is the Achilles hell of the UK economy, government should control the inflation rate and try to keep it down by managing aggregate demand for property. Thus they can control investments. And as debt ratio is strongly dependent on income, while income is not normally distributed nowadays, then the UK governments might consider redistributing of income in order to control inflation and decrease borrowing. Also it is suggested that there should be more affordable property and if not than government should invest more in housing market. Some economists and financial advisors predict the growth of the market by 3 percent at the end of 2003, but others say that it can not be possible without firstly income redistributing and secondly, without rising the level of economic activity, which is not that easy. To conclude, almost all homeowners think in short terms, however, government should be concerned with long term perspectives and try to maintain the long term position of the market. . ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics 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 GCSE Economy & Economics essays

  1. Describe the main aspects of the economic boom in the 1920's.

    After the hardship of WWI young Americans wanted to have fun, so new, exciting forms of music and dance became all the rage. Jazz music was the most popular in the 1920's - often called 'The Jazz Age'.

  2. boom and bust

    It could be said that these Republican policies did not just contribute towards the boom but actually were responsible for the initiation of the boom by providing the perfect conditions for a quick boom. The lack of regulations ensured that prosperity wasn't hindered and businesses weren't deterred from expanding.

  1. Bellway Plc is a holding company with subsidiaries; its main subsidiary company is Bellway ...

    companies to succeed in a contracting economy than in an expanding one. * State of the economy If the economy is in a recession then confidence in the economy will be low and consumers will inclined to spend. SOCIAL * Increased life expectancy Derived from better living conditions and advances

  2. Is residential property in the UK a good investment?

    This is all very important because as people become richer, more will wish to buy houses thus increasing the demand and therefore rising prices. There are many who say that the best thing to invest your money in is in bricks and mortar; however some see a bubble in the housing market which is close to bursting.

  1. This report will establish the opportunities and threats presented to Sony by the EU ...

    They have a GDP per head of $21,919 also it is the world's largest exporter and second largest importer. As many of the people in Germany earn a great deal of revenue they desire to buy quality, value-for-money products which Sony can supply them.

  2. The Housing Market

    However, since this time, the lack of available social housing has caused some problems as the production of new houses gradually decreases. The Private Rented Sector The private rented sector is less significant in the UK than most other European countries and the U.S.

  1. The Economics of Housing Provision

    Demand is the amount of a good that consumers are willing and able to buy at a given price. The Theory of demand states that at higher prices, a lower quantity will be demanded than at lower prices, ceteris paribus.

  2. Chinese car market overview. Citroen case study

    China's new leaders will take charge of an increasingly capitalist society of 1.3 billion people that is struggling to cope with its entry into the free-trading World Trade Organisation. Despite its social and economic transformations, China's communist political system has resisted change a closed, secretive system that harshly punishes dissent

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