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An Investigation Into The Housing Market

1143 words - 5 pages

An Investigation into the Housing Market

Economics

Describe and analyse the changes of housing in the local area over the
last 5 years

The housing market is one of the most talked about topics in the news.
I assume this is due to the high influential potential it holds to the
rest of the economy.

In this essay I will focus on the causes in house prices. I will
investigate how prices have changed nationally and locally. I
interviewed an Inter counties estate agent to help my investigation
and get his views on the situation.

The price of housing fluctuates enormously. Not only does it vary from
region to region, but also it is also very volatile within these
regions. There are many causes for these unstable prices. According to
a spokes person form the Inner county estate agents says there are
many factors, which influence the housing market. He believes one of
the main factors, which have been influencing the local housing market
in the southeast, is the large amount of people coming to work in
Cambridge recently.

The supply curve appeared to be vertically vertical in the short run.
However, the high demand resulted in predictable high prices. Many
building companies have also respond to the increases in demand,
however this response will not be immediate.

Another reason why we saw the price of houses rise was due to the low
interest rates. This means the borrowing of money to buy a house is
significantly cheaper, which is therefore retaliated with via the
increase in the actual cost of a house.

London being so close is another major pull factor for people wanting
to live as near as possible to where work is more likely to be found.
Commuting times and facilities like trains and motorways play a major
role in opening up areas as 'commuter land'. People often put up with
long commuting distances in order to escape from city living as a
family, or to find more affordable housing at greater distance from
where they work. This is why Saffron Walden has become so posh, since
people have realised the benefits of life in a town of this size in a
manageable distance to London.

Hypothesis:

If interest rates are going down, will increase demand for housing
which will then in turn increase house prices.

When one buys a house, one is paying for the actual house price, a
mortgage, and the interest rates on the mortgage unless one has
savings to cover the buying cost straight away. In the long run the
cost of borrowing plays a major role in the evaluation of the house
prices.

For example, if a house costs £200,000 and to buy this house a
mortgage is needed of £100,000 and the interest is 4%, this makes an
annual interest rate of £4000 per year. Although 5% may not sound like
a big difference, if we calculate the difference it would increase the
interest rates per year by £1000 in this situation making a grand
total of £5000. Since they have taken £100,000 out of their savings,
they no...

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