The Housing Market
The housing market is possibly one of the most important markets in which we as everyday consumers take part in, simply because housing is a necessity and also probably the largest consumption good that is purchased. The majority of the average person's income would probably go towards either rent or a mortgage. This is true also in terms of business expenses. It has been argued that decent housing has external knock on effects on society in that those provided with a better living environment are more productive, healthier and better educated individuals, and this in turn leads to increased economic growth.The housing market can be broken down into three interconnected markets: This is the most common form of housing in the UK. As mentioned previously, house buying is for the majority of people the largest purchase made. Mortgages are obtained in order for consumers to afford properties, these basically being loans from a bank, building society or other financial institution. On the whole, lenders are prepared to agree to a mortgage equal to four times the salary of the consumer, i.e. for someo
Semi-detached 4-bedroom, East Barnet; a desirable location in the suburbs of London, easily accessible, good educational facilities and health care It is to be expected that over a number of years, the average wage earnings would increase as new technology is introduced and workers become more skilled and better educated as the number and quality of facilities increases. Throughout the 1970s a gradual increase is illustrated. However, as we reach the 80s, the proportion of this increase greatens. Firstly this could be due to the Conservative Government's introduction of restricting the number of social housing. As a result, people may demand higher wages in order to pay rent. People with more disposable income may have increased the demand for owner occupation housing, which in turn would push prices up. However, since private rented housing is such a small sector in the UK, there must be other factors involved. From a completely different point of view, it could be said that it was an increase in house prices that caused earnings to rise, as people demanded higher wages in order to afford mortgages. However, we are yet to find a cause for this rise in prices. In 1987, the government announced that within the following year, it would abolish joint tax relief. This caused a surge in demand for owner occupation housing, and by 1988 when tax relief was indeed abolished, prices had risen significantly (Table 1). In extreme cases, one-bedroom flats were being rented for up to L1000 per month, and this started the ball rolling for a knock on effect throughout the housing market, and indeed the state of the economy. As a result of this, wage increases were demanded, and more and more people started borrowing money in order to keep up payments. In order to prevent high inflation, the government in
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Approximate Word count = 1215
Approximate Pages = 5 (250 words per page double spaced)
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