There is only one factor that determines the value of a house: Fair Market Value.

priceJan-02325.91.8100,684Feb-02329.21.0101,708Mar-02331.60.7102,468Apr-02332.70.3102,808May-02346.94.3107,184Jun-02355.22.4109,756Jul-02361.71.8111,771Aug-02362.50.2111,990Sep-02378.44.4116,925Oct-02396.64.8122,531Nov-02402.51.5124,355Dec-02393.7-2.2121,642Jan-03399.51.5123,422Feb-03406.71.8125,649Mar-03411.21.1127,040Regional UK house prices NorthYorkshire and humbersideNorth WestE.MidlandsW.MidlandsEast AngliaSouth WestSouth EastGreater LondonWalesScotlandN.IrelandUK19844.86.13.96.93.98.46.39.711.64.59.17.97.219854.65.66.09.15.611.810.713.017.66.36.35.79.119864.56.88.08.78.914.611.816.521.66.63.46.411.019876.59.17.614.614.625.320.225.425.710.25.80.115.4198812.118.816.528.835.743.037.628.422.324.510.24.223.3198933.743.635.530.029.62.611.55.12.332.818.13.120.8199013.66.612.6-3.6-1.1-12.0-8.6-8.1-5.81.910.41.10.019912.81.23.9-2.81.0-5.0-5.1-6.1-5.8-1.15.911.2-1.21992-1.6-3.6-4.3-5.9-4.6-7.4-7.8-8.5-9.4-4.30.2-1.0-5.61993-1.8-1.6-3.0-2.8-4.5-2.7-4.1-3.3-4.9-1.61.64.3-2.91994-1.3-0.9-1.60.4-0.41.31.51.81.8-1.21.66.90.51995-3.8-3.1-3.7-2.5-1.2-1.1-1.30.3-0.4-3.80.06.6-1.719963.12.41.42.74.22.14.85.09.05.92.818.34.519972.31.82.95.85.66.77.510.716.03.1-0.13.06.319982.30.51.73.85.46.48.010.410.53.82.511.95.419994.22.94.86.51.97.59.911.016.85.51.45.67.220000.83.25.08.210.816.017.017.417.55.50.76.39.820015.55.65.48.46.815.412.611.414.77.72.712.28.5200216.015.614.525.920.719.623.016.616.613.68.43.617.4So, it now costs over £120000 on average to buy a house somewhere in the UK but in some parts of the country it is less. Alas, for those wanting to move to London and the South East they are looking at close on £200000 for a property. The regional variances are quite large. What then determines the price of somewhere to live?The housing marketWhen revising for this paper you should focus your attention on:The housing market structure of UK but don't forget to look at that which applies to your own region How the demand for houses is determined How the supply of housing is determined How the housing market and the national economy are linked and why Let's look at each in turn.The structure of the housing marketHouses are seldom perfect substitutes for each other. So, what is it that determines the housing market? Well, you can rent, buy or share. Some properties are bought be people who are one stage in their life, whilst others attract a different age group. Women, especially those not yet in a permanent relationship are now buying houses. The largest single sector of the housing market is the owner occupier portion of the market. Most of these purchases involve a mortgage. This is a loan from a bank or a building society and is secured against the value of the property. Most of us can't afford the asking price of a property and so we 'borrow' the majority of the value of the property. We then pay this back over a period of time, which is normally around 25 years. If you do buy outright you are a cash buyer and a rare sight in the market. When you buy your first property you are a first time buyer It is also advisable to take out a form of insurance when first buying a house as you may not always be able to afford to pay the monthly payments.Houses come in many different types and forms. There are detached, semi-detached, maisonettes and sheltered accommodation. There are others but the list contains the most common. The market is relatively free, in that you have to approach the seller and negotiate. The greater the demand for a property the more likely it is to increase in value. Value is normally decided by surveyors, who take into consideration such factors as location, age, facilities, post code and the extra features contained within the property. They might also put a value of proximity to transport links, shopping centres and other amenities.Today most houses are owner-occupied, but other sections of the total housing stock are provided by:Local authority rented accommodation Private rented accommodation Housing association stock We also have to remember that regional variances arise within the housing market. Such differences are mainly the result of:The immobility of housing The availability of housing land Planning controls Regional economies and their success/failure Population density and growth Migration The immobility of labour - though it's housing that often contributes to this, it too can cause 'market failures' within the housing sector So, what determines the demand for housing?Consumer income and their ability to take-on a long term debt Employment security The acquisition of wealth, say by inheritance and the levels of tax charged on estates The appreciation in the value of houses already owned The cultural attitudes towards trading up through the market and just where 'having your own roof over your head' comes in the average person's plans The level of interest rates and expectations The types of mortgages and other long-term financial packages available for house buying That's enough for this week. Next time we shall look at the supply of housing, the national economy and housing and what type of questions might appear in the final examination?Some questions to considerHere are some questions on related issues:Why have house prices risen so much in the last few years? Should house prices be so different in the various regions of the UK? What determines the demand for housing in the UK? Could the dramatic rise in house prices be about to stop and why? Possible answersHouse prices have risen considerably in recent years as the demand factors have been rising more quickly than the supply factors. Consumer incomes have been rising faster than inflation and employment has looked secure for the majority of new and already established members of the owner occupied sector of the market. Also, more families have been parting and so the original members now require two homes rather than one in which they first started their co-existence. Young females now put off permanent co-habitation for longer than did previous generations and they also enter the property market. Interest rates have been at their lowest for many years. So, confidence has been high and yet supply cannot respond as quickly. This means that pressure has been on prices to rise. People have therefore seen their personal wealth increase, though it cannot be released without selling the property on which it is based.The regional variation in the UK is largely caused by: The inability of the supply for houses to meet the changes in demand, especially the mobility of certain types of labour The differences in regional salaries and living costs The availability of building land and permission to build The variations in the economic success rates of different regions Population densities, regional facilities and the migration of population in and out of some regions Job prospects and employment history differences The demand for housing in the UK is mainly driven by income levels (in real terms), employment security and interest rates. The latter is especially the case in the UK as we buy houses by mortgages and these are very sensitive to short-term interest rate changes. In the UK the major form of personal wealth for all but the richest of land owners is through property ownership. This enables one generation to pass some form of wealth onto their successors. House price inflation has been rising faster than retail price inflation and so the ownership of property has been a 'hedge' against falls in real income. The UK is, in many ways, a property owning democracy and it is central to our way of life to try and buy some type of property. With new types of flexible and fixed mortgages people can plan their financial future with greater certainty and so more are seeking to buy property. Within the demand schedule the patterns of buying have been changing. For example, more first time buyers, more female only buyers and an increase in people moving up the ladder of the property market.Yes it could. Though employment confidence remains high a growing number of people are just beginning to feel a little less secure in their current form of employment. The world economy, especially the US could be about to slow down and that would lead to a fall in aggregate demand. Instability in the world, such as the threat of terrorism has also heightened an awareness that the good times might be coming to an end. Also, the cost of a first house has risen to levels where a declining number of people can afford to pay mortgage charges. Though some suggest that the appreciation in house prices will more than double over the next twenty years the enormous rise in prices over the last few years is now probably coming to an end. House prices will continue to rise but not at the levels recorded recently. However, if the supply of building land, of both brown and green variety does not expand to meet predicted demand increases the prices may yet return to their recent levels of increase. What Determines The Value of Your Home?  When comparing properties within the same neighborhood, the following affect market value: Size of the house Condition of the house Number of bedrooms, baths & fireplaces Improvements such as new kitchens, baths, skylights, decks, roofs, HVAC Systems, upgraded windows, etc. Additions such as first floor family room, garage, breakfast room Size and usability of the lot Garage(s), carport and/or off-street parkingWHAT DOES NOT AFFECT VALUE?What you paid for the house Your re modelling costs The amount of cash you need to buy your next home What you want for your home What I say your house is worth What other real estate agents say your house is worth What an appraiser said your house was worth What the tax assessor said your house was worth What your house might have been worth two years ago