Housing Market Update September 2015

There are eleven buyers chasing every house for sale in the UK. Supply has fallen to an 11 year low, with half of buyers having no property to sell. This means the housing stock is being replaced at a slower rate and the gap between supply and demand is rising

The supply of houses per branch fell from 55 in July to 38 in August, with a 12 % decline in house hunters, down from 462 per branch to 408.

First time buyers are being squeezed out.

Prices rose by an annulalised  8.3% in the UK’s major cities in August, up from 6.6% in May. But the gap between London and other regional cities is the widest for 20 years, with an average price in the capital of £437,700 – twelve times average earnings. House prices in Bristol are 47% cheaper, and 75% cheaper in Glasgow.

“The price differential to London could assist regions in attracting new investment”, commented Richard Donnell of Hometrack. “Only a recovery in the rate of moving or more new supply will ease the situation”.

New house registrations were down 6% in August but this may be due to proposed reforms to welfare benefits and the government proposal to allow those in housing associations the right to buy.

Data source: Times 25.9.15

Questions:

1. What are the major influences on the demand and supply of housing in the UK?
2. Draw a demand and supply curve for 2015 illustrating what has happened to the housing market.
3. What are the likely effects on investment and employment of the differential between UK city house prices?
4. Recommend two policies a government might adopt to ease the situation.
5. Mortgage lending showed a 14% increase in August 2015 (the largest since 2008). How might we reconcile this fact with the above data?