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Research Project

The UK Housing Market - The Basics

The housing market is like any other market - it consists of buyers and sellers who come together to agree a price for a transaction. In some respects that is where the similarity ends. Houses come in all shapes and sizes and represent the biggest single purchase most people will make in their lifetime.

It is also the place where we live and raise families and also has to be somewhere convenient for work, school, college and so on. As a result it is something to which we have a considerable emotional and physical attachment. This can mean that the normal factors that influence supply and demand take on different degrees of significance. For example, houses are not very mobile things and so the supply of them tends to be affected in a different way than some other types of product.

Demand for Housing

Task 1

We are going to try to find out what factors might influence the demand and supply of houses. This will involve recalling some knowledge and then applying it to the context in this project, i.e. houses.

  1. Write down a definition of 'demand'
  2. Using the Interactive Markets resource, make a list of the factors influencing the demand for a product. (http://www.bized.co.uk/learn/economics/markets/mechanism/interactive/part2.htm)
  3. Take each of the factors in (2) above and think about how they relate to the demand for housing. For example, what might a substitute be for buying a house, is there a substitute for a house?

Supply of Housing

A street of old houses

Image: The housing stock - the number of houses in existence at any one time is relatively fixed over the short term, but the number of houses coming onto the market will be dependent on different factors. Copyright: John Noble, stock.xchng

Having considered the demand for housing, let's now look at the supply of houses. The supply of houses depends on several factors:

  • The number of new houses being built
  • The number of existing houses being renovated and refurbished then offered for sale
  • The number of existing house owners who wish to sell their house

Each of these factors will be dependent on different things although there might be one common factor running through each of them:

  • The price of houses or the expected price in the future
  • Planning regulations
  • Government policy and legislation (see our Wanna Argument? feature on this(http://www.bized.co.uk/current/argument/arg18-4.htm))
  • Family circumstances
  • Employment trends
  • Economic activity
  • TV programmes
  • The age distribution of the population

Task 2

You have been given some hints about the factors influencing why the supply of houses might change.

  1. Write down a definition of 'supply'.
  2. Explain why the housing stock stays relatively fixed in the short term, rising only very slowly in the long run.
  3. Using the Interactive Markets resource, make a list of the factors influencing supply. (http://www.bized.co.uk/learn/economics/markets/mechanism/interactive/part2.htm)
  4. Link the factors in (3) above to the housing market; use the bullet pointed list to help you in this.

The distinction between the stock of housing and the amount of housing on the market is an important one. You can get a large amount of data on the housing stock from the Office for National Statistics (ONS). (http://www.statistics.gov.uk/CCI/nscl.asp?ID=8253)

The Market for Housing

Let's now put the demand and supply together to form the market for housing. When we talk about 'the market for housing' we need to be a little more specific in what we are referring to. The market for housing is in fact made up of a large number of smaller markets each of which could be viewed on its own merits.

Task 3

Identify the subsections of the housing market - to give you a clue to start off with, the market for bungalows may be different to that of a 3 bedroomed semi-detached!

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