During many years, people have making decisions of investment in many markets, such as, vehicles, fashion, and houses to cover the main need of all invidious. However this last market has been very volatile because of all social factors (unemployment, poverty, etc) and economic factors that have changed drastically over the past years crating a heavy impact on those are directlyinvolved, builders and people; this latter have invested but due to economical recession has caused, they have had to get their homes back to banks for non-payment due to high rate of interest. In the same way many people had to go to rental spaces being a more economical option. The following analysis is made in the house market during the interval 2006 to 2010, identifying how affected demandand supply in this market.
House Market in United Kingdom and mainly in London has tended to fluctuate during the last ten years, for example, prices in London rose 3.95% (3.3% in real terms) between 1996 and 2007. At the beginning of economical and social crisis, it affected considerably the demand and supply in the house market. The price of houses was going up due to rapid expansion of themortgage market. “Outstanding secured lending volumes rose by more than 10% annually from 2001 to 2007. In 2008, outstanding lending growth slowed to 3.2%. Except for standard variable-rate (SVR) mortgages, interest rates on housing loans were between 5.5% and 6.5% between 2007 and 2008. For this period the house prices fell 19.8% (-23% in real terms)”. (William, 2009)
“In November 2008, Bank ofEngland’s key rate was reduced by 1.5 percentage points to 3%, the single biggest rate cut in the bank’s modern history. By March 2009 the key rate was down to 0.5%, the lowest rate in the bank’s long history. As of October 2009, the key rate remains unchanged. There was resurgence in this market rising slowly up and the average house price in London was 4.8% up”. (William, 2009)
At thebeginning of 2010, the price of houses continued increasing around UK regions and improvement in their annual rate of change. London was the first place in maintaining its position as the best performing region with prices going up with a reason adjusted at 2.5%. This score helped to the annual growth being from 7.0% to 15.7%. Mainly, in London this relation of prices has increasing from 1.5 to 1.75from 2005 until nowadays in comparison with the rest of areas in UK.
Price´s tendency in London during 2006 a 2010 can be shown in the next graph:
FACTORS ON DEMAND IN HOUSE MARKET
PRICE OF OTHER SUBSTITUTES
After the economic recession between 2008 and early 2009, some reporters advice a significant decline in rental market because of rising in house market, which started to stabilize.In Q2 2009, the residential rental market started to calm down in the same way that the oversupply started to relieve, with an increase seen in the number of tenants. Although against forecast residential rents have declined as a result of the crisis, they had performed better than house prices. This has led to healthy yields, despite the recession.
“London was an exception. Prime Central Londongross yields dropped to 4.38%, from the recent peak of 5.25% in Q1 2008. For the rest of London, yields fell to 4.94%, from the peak of 6.05% in Q4 2004. The June 2009 Global Property Guide rental yields study confirms this picture. Gross rental yields on flats in Prime Central London ranged from 2.9% to 4.5% with smaller units earning the highest returns”. (Propertydrun, 2010)
To accordingreports between May and July of 2009, the demand for flats rose as faster as demand of houses, because the mortgages had stabilize, however currently people are upset by buying houses without having a clear expectation in the market houses, with 12 percent more surveyors reporting a rise rather than a fall in demand for flats, compared to 5 percent reporting an increase instead of falling houses....