DEMAND AND IN UK RESIDENTIAL HOUSE PRICES

Demand and in UK Residential House Prices

Demand and in UK Residential House Prices

Introduction

The best example of microeconomics can be seen as prices are determined in the local and regional property and real estate markets. Buyers and sellers interact with each other for the purpose of offering and agreeing to specific prices, prior to the final transaction. Therefore, it is important to discuss the functions of demand and supply which establishes the market value and price of properties in the real estate.

Every transaction in the housing sector of UK depends on:

(a) The determined or the settled price, which the seller is prepared to accept in exchange of their estate with the potential buyer

(b) The price (actual) which the buyer can afford to pay.

Offers are placed by the buyers for a specific property, which can either be accepted or rejected.

A Sellers Market

The power of sellers is generally high in situations where, demand for properties in the market is high, but the market has shortage of quality properties (scarcity of supply). In such situations, the power in the market shifts towards the seller. It happens because demand exceeds supply in the market for quality houses. Sellers get the opportunity to either wait for offers which equal the value of their property, or exceed their minimum demanded price. (Gillespie, 2001)

A Buyers Market

On the contrary, at times when demand is weak, irrespective of quality or older properties, and there is excess supply of properties in the market, then power shifts from sellers to potential buyers. The buyers get the opportunity to choose among the abundant supply of housing properties, at a negotiable price which is well below the published price.

As demand for houses in specific regions or areas rises (such as in situations when there is an influx of population, or increase in incomes subsequent to drop in unemployment), it causes an upward trend in the real estate prices.

Most of the times, the supply of available housing in the market is comparatively inelastic. This is due to the fact that, there are time intervals between adjustments in price and a rise in the supply of newly constructed houses becoming available, or other proprietors who decide to offer their houses into the market.

As demand moves outwards and supply gets inelastic, it results in a huge increase in market value and a comparatively minor growth in the number of exchanged houses. When supply turns further elastic by the passage of time, supposing the state of demand does not change, it is expected that there will be a downward trend in the pressure on market prices and more increase in the balance in the number of houses bought and sold.

The Aggregate Demand for Housing in the UK

As far as the market for those houses is concerned, which are occupied by their owners, it is relatively sensitive to demand and supply changes in the market. The influence and intensity of such elements, most of the times, clarify the differences in inflation ...