The rental market for properties in England has been influenced majorly by the financial crisis in the past few years. This is partly due to the fact that the high property prices exclude a lot of first time buyers from the property market. First time buyers are younger people who recently left university or are ready to move out of their parents or others house. In most cases not much money is available yet, only some savings and on the current market there are less and less properties for first buyers. As financing is getting more difficult and income prospects are less good, especially young people are struggling to get on the property ladder. For them the rental market is an important alternative, as it doesn't take away all their savings and its more affordable. However, this will have an impact on the rental market over the next years, as more and more people tend to rent properties nowadays, if young or old. The supply of rental units in London in a short run is inelastic, as a result of the time taken to build new houses and apartments. There is an increase in the demand curve, as more people demand housing, this is shown in the diagram 1, the demand curve shifts to the right, therefore the rents will increase from P1 to P2. On the other hand in a long run the supply of rentals will be considerably more elastic, as there will be enough time to build new properties or to convert them into new and improved properties. Therefore if the increase in demand sustains for a period of time, there will be an increase in rents on the rental market, Q1 to Q2, and a greater supply of rental properties on the market, as shown in the diagram 2. The usual demand and supply curve changes as follows on the housing market. If there are too ... ... middle of paper ... ...le who cannot afford the high prices are interested in the rental market, and as the demand in the rental market rises with it the price of the rental properties rises as well. The options for people looking for housing in the United Kingdom is expensive currently. The government is working on providing more properties to sell and buy at a cheaper price but it will take a few years until the house market is more affordable again. Works Cited Begg, D.,2009. Foundations of economics. 4th edition. Berkshire: McGraw-Hill Education. Blink, J. and Dorton, I., 2007. IB Diploma Programme: Economics Course Companion. Oxford: Oxford University Press. King, M., 2011. Rents hit record high as housing demand outstrips supply. The guardian, [online] 15 July. Available at [Accessed 20 March 2014].
The housing market is very unique as unlike other goods and services, houses have permanence, it is a fixed location good causing the rules of supply and demand to be taken to new extremes. In the case of the Toronto housing market we can view in almost real time the role supply and demand play on he ever increasing house prices, additionally the fundamental economic issue of scarcity is made extremely apparent by the limited size of the city of Toronto.
The lack of available social housing is mainly due to stock levels steadily diminishing each year since 1980, after tenants bought nearly half-a-million council houses under the ‘Right to Buy’ scheme. This coupled with the decline in house building; which is currently at its lowest level since 1946, has brought about a shameful lack of affordable public housing (Turffrey, 2010).
There are people in the neighborhoods that can enjoy the neighborhood enhancements because they know they can survive the inflation of their rent. There are people that are oblivious to the fact that their rent will increase a significant amount, because they are excited that there will be shiny new locations arriving in their area. Once their landlord explains to them that their rent will increase – in New York it could be up to fifty percent – they will be struck with the sad reality of gentrification. Gentrification is similar to other social issues, primarily in the fact that one does not think about the issue until it affects them.
The housing affordability crisis has been slowly developing over decades. This implies that young households – in particular young families who want to get their feet on the owner-occupied housing ladder, are hardest hit by the crisis. (Housing Supply Working Group) It is clear, historically, that even with significant private sector rental development, there will always be a need for some government role in assisting low-income households with housing affordability and other income problems. The impact of lack in rental supply and the consequent upward the pressure on rents is pressuring on all levels of government for assistance to low income households so that they can afford suitable and adequate housing. And the household formation will be delayed as young people are unable to find affordable rental accommodation if the shortfall units of rental housings keep remaining. (Housing Supply Working
This high demand can be due to what many people call “historical low interest rates” as more people are interesting in home ownership especially young people to take advantage of these low rates. A prosperous tech industry in the area that keeps attracting highly skilled workers who earn higher than average incomes increases demand. In her article “Housing affordability crisis drives Bay Area middle-class exodus”, Mary Ann Azevedo explains that the Bay Area created 114,000 new jobs in 2014 and only 8,000 housing units. Azevedo further explains this low inventory, “The City of San Francisco is still producing only 2,000 housing units per year — when it has needed more like 5,000 for the last 20 years and going forward.” These statistics provide a clear picture of the seriousness of the situation and explains one of the major reasons that are driving the prices up with no sight of slowing
House prices have been affected by the number of people who buy houses to rent out and this has had an impact on younger people wanting to buy homes. Thus, the term ‘generation rent’ has come to the forefront in recent years. In A Century of Home-ownership and Renting (The Open University, 2016) census data presented supports the claim for the use of this term. In the video, they mention levels of home-ownership dropped for the first time since records began. From 69% to 64% in the space of 10 years and the percentage of households privately renting has been on the rise. 11% in 1981 compared to 18% in 2011. In addition, house prices have risen faster than previous years and banks have also restricted lending. These factors have all lead to more people not being able to afford a home of their own, especially at a younger age. So, as house prices rise this benefits the home-owners and allows them to gain more wealth and capital. The distribution of wealth has been affected by changes in these markets. There is evidence to support this claim. Table 3.5 (Investigating the social world 1, chapter 3, p. 96) shows wealth distribution in Great Britain from 2000 and 2005. The table shows results for housing wealth distribution amongst other things. It’s important to look at the look at the lowest and highest percentiles to look at any
This increase in demand leads to an increase in the cost of rents in the
In President Reagan's own words, homelessness is one problem that we have had, even in the best of times (Reagan). However, economic experts are all in consensus that this is the worse era for the housing market. One...
In contrast, one of the negative impacts of gentrification is the fact that the cost of living is likely to rise. Property prices and rents may go up, pushing tenants out of the areas they had inhabited for years. Those buying houses may evict the inhabitants to move in themselves or rent the houses out to new arrivals who will be willing to pay the high rents being charged. D.W. Gibson notes that residents who own houses may also decide to take advantage of the rising property prices, sell their houses, and move out (Gibson). The culture and character of a town will slowly be transformed and lost
ROBINSON, Joan (1965b). “The General Theory after Twenty-Five Years”. Collected Economic Papers, vol. III, pp. 100-2.
A house is not only an expense that is financed by long term debt, it is also an asset that stores value. Purchasing a house can be a daunting experience as it will be the biggest expenditure of one’s life and one needs to ensure nothing goes wrong during such a process. This paper covers two questions in relation to purchasing a house: pros and cons of renting versus buying a house and the role of title search while making a house purchase.
In the graph, it shows the law of demand; as the price increase there is a decrease in the quan...
The main problem rent control can create to landlords is the case of the tenant do not move out because of the good rental price. That causes the landlords to lose money by not being able to increase the rental price of their units. Besides, the price of maintenance continues to increase, causing landlords to not earn any profit with their ...
A change in quantity supplied is just a movement from one point to another in the supply curve. In opposite, the cause of a change in supply is a change in one the determinants of supply that shifts the curve either to the left or the right. These determinants are the resource prices, technology, taxes and subsidies, producer expectations, and number of sellers. An equilibrium price is required to produce an equilibrium quantity and a price below that amount is referred as quantity supplied of zero no firms that are entering that particular business. If the coefficient of price is greater than zero, as the price of the output goes up, firms wants to produce more of that output. As the price of the output goes up it becomes more appealing for the firms to shift resources into the production of that output. Therefore, the slope of a supply curve is the change in price divided by the change in quantity. The constant in this equation is something less (negative number always) than zero because it requires strictly a positive...
O'Sullivan, A., & Sheffrin, S. (2005). Economics. Upper Saddle River, New Jersey: Pearson Prentice Hall.