• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month
  1. 1
  2. 2
  3. 3
  4. 4
  5. 5
  6. 6
  7. 7
  8. 8
  9. 9
  10. 10
  11. 11
  12. 12
  13. 13
  14. 14
  15. 15
  16. 16
  17. 17
  18. 18
  19. 19
  20. 20

Construction Economics. This essay will outline the key factors of supply and demand in the market for new owner occupied housing in the UK and how this forms a market price and quantity sold. It will also analyse how changes in average income, costs of

Extracts from this document...


Construction Economics SUMMARY The economics of supply and demand in the UK new housing market are summed up by saying that they consist of many factors, all of which have to consider before an analysis can be made. They each have their own strengths and weaknesses and all have to consider on their merits before a decision can be justified. Many of the factors concerned are what we come across in our working day lives. Supply and demand is about price the consumer wants to pay for it as well as what the producer wants the consumer to pay. It also shows how the producer will use manipulation on the consumer to try and entice them, even when they may never have considered a purchase. CONTENTS SUMMARY 2 INTRODUCTION 5 MAIN FACTORS OF SUPPLY AND DEMAND IN THE HOUSING MARKET 6 IMPACTS OF CHANGE IN LEVELS OF INCOME 14 IMPACTS OF CHANGE IN COSTS OF RENTING 15 IMPACTS OF CHANGE IN COSTS OF LABOUR 16 ANALYSIS OF ELASTICITY OF DEMAND 17 APPENDICES 18 DIAGRAMS 1.0 How supply and demand effects price 6 1.1 Division in property prices in UK 7 1.2 Graph of divisions in north and south of UK 8 1.3 Effects of costs 9 1.4 Effects of increase in demand 9 1.5 UK supply of credit for homes graph 10 1.6 UK interest rates graph 11 1.7 Supply and demand graph 10 1.8 Determinants of supply 11 1.9 Effects of Increase of demand and price with low interest rates 12 2.0 Higher inflation graph 13 2.1 Gradual recovery in the market graph 13 2.2 Sustained economic graph 14 TABLE OF CONTENTS 1.0 Effect on demand for houses 12 2.0 Impacts of income change 14 3.0 Impacts of costs in renting 15 4.0 Impacts ...read more.


So looking at those statistics we can assume that personal choice and social trends have a say in supply and demand of new build housing. Average house prices within the UK have increased by 273% since 1959 equating to an average annual rate of 2.7%, where the average rate for income earnings was 2%. The biggest rise in house prices were in the 2000s where they increased by 62% previously beating the 1980s with 61%. The 1990s were the worst on record where they fell by 22%. Key determinant for demand of housing is low interest rates if they are high then this will suppress the demand. The other is income that is being earned. If income rises then more equity becomes available. Diagram 1.3 Diagram 1.4 Increase in costs Diagram 1.3 shows the effects of an increase in costs in the short-run. If construction costs increase CCo to CC1 developers will find construction less profitable and will be more selective in their ventures. In addition some developers may decide not to proceed. The quantity of housing starts will decrease HSo to HS1. This will eventually reduce the level of supply from SHo to SH1 as the existing stock of housing depreciates. Prices will tend to rise from Ro to R1. Diagram 1.4 on the right illustrates the effects of an increase on demand in the short run. If there is an increase in demand for housing, such as the shift from Do to D1 there will be either a price or quantity adjustment, or both. For the price to stay the same, the supply of housing must increase. That is, supply SHo must increase by HS. ...read more.


Analysis of Elasticity of Demand Where do you start and how do you know when it is elasticity of demand. This is essential for anyone who is in the business of selling goods, whether it is a confectioner selling chocolate bars or a building contractor selling houses. We will be looking at the latter as Housing is a larger commodity and more equity can be gained or even lost if figures are calculated wrongly. Firstly what is elasticity of demand; it is when quantity demanded increases by a greater percentage than the price. % ? Qd / % ? P So if quantity was originally ten and original price was four pounds, what happens if quantity increases by 10 percent and price increases by five percent. 10 + 10% = 11 �4 + 5% = �4.20 10/4 = 2.50 11/4.2 = 2.619 As you see from the sum above it has increased from 2.50 to 2.619 this is known as elasticity of demand. So if a local builder was seeking to maximise his revenue from a site he was planning to build on he would have to increase the quantity of housing he had originally planned and for the prices of the properties to increase in price also. If he had originally planned to build four houses with a price of �150,000 he would have to build one more house which would make the total of five houses making an increase of + 25% in quantity of original amount. If the price also increased by + 10% then the new price would be �165000. To work out if this elasticity of demand we have to follow the formula already used. Qty of houses =4/ Price = 1.5 = 2.66 4 houses + 25% = 5 houses / Price = 150000 + 10% = 165000 =1.65 = 3.030 = + 0.3703 = elasticity of demand. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our University Degree Planning 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 University Degree Planning essays

  1. Real estate Market Analsis

    One should not neglect the growing influence of Chinese investors resulting in 'hot' money flowing into Singapore's property markets. More expatriates and foreign investors from other countries are also expected in the next five years, making them one of the key demand drivers for luxurious condominiums.

  2. Case Study procuring construction. Interserve Ltd. (Contractor) are 41 weeks in on a school ...

    Firstly to ensure that they remain competitive to get onto the framework in the first place, but secondly that they have the capability to service the framework for the four year duration in line with their mission statment. Management (Department Heads & Directors)

  1. Impact of Technology in Construction

    There is reduced by factories ordering materials to specification and the significantly less damage to materials that can be caused on-site. The reduction in transportation is significant due to factories mass ordering and producing which results in the reduction of frequent on-site deliveries.

  2. Sustainable House

    As steps to achieving this target, energy efficiency standards for new homes are to be improved by 25 per cent in 2010 and 44 per cent in 2013 relative to current 2006 standards (Department for Communities and Local Government, 2009).

  1. This document is an adaptation scheme proposal and feasibility study report for Manor House. ...

    Bus services are frequent and regular to the city centre, Lewes and other local areas. Please refer to the appendix for Brighton Area Bus Routes Map Limited on site parking space is available. 1.3 Current problems with the building There are a number of problems that have been reported by the building's current users.

  2. Economics & Finance in Construction - Cost control techniques

    Disadvantages are the GMP has to be agreed on before the design process begins. So because of this factor the client will never know whether they received the best bid, this can also lower competition in terms of pricing contractor overhead, fees, and subcontract costs.

  1. This report aims to analyse the reasons behind delays in site set up and ...

    C ? Concept The Design Concept will be prepared, including outlines for the building services system and the structural requirements Outline specifications and preliminary costs will be looked into. D - Design & development Design concept will be developed with aspects of health and safety being considered.

  2. Impact of Planning in the Property Market

    Mohamed (2006) identified that without planning regulation satisficing occurs in developers and they would build on green field sites which are quicker to develop leading to ribbon developments and urban sprawl. Those who think of the market as a neutral allocator of resources might actually amplify volatility (Needham 2000)

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