Housing sector is considered to be one of the most important aspect of market as it directly contributes to enhancement of GDP. The report makes a comprehensive discussion regarding housing market of UK and various issues that are being faced by the market since Brexit negotiation have started from EU. There are various conditions based on which the prices of various real estate element in the form of demographic factors, income stability and overall economic condition of the country. The report will then be focussing upon role of government in housing market and various barriers that take place due to interventions from their side. Local authorities also play an important role in stabilizing housing sector in such a manner that rights and interest of tenants and landlords can be protected. The report also discusses regarding important of corporate social responsibility in housing sector of UK.
UK Housing market
About Housing market of UK
In General, it is a market of houses that are actually being purchased and sold by the buyers, either through brokers or directly by the seller. It is a real estate market place, where a Fundamental forex trader is responsible of keeping a close eye on housing market of the country and assessing the ongoing prices of houses at different locations. Buoyant housing prices reflect an increase in the consumer spending. It is an effective indicator of strong economy (Cuéllar-Franca and Azapagic, 2012). The main stakeholders that belong to real estate industry are homeowners who are interested in selling their properties, real estate investors who buy properties solely for resale purposes, rentals, renovators, contractors as well as real estate brokers who generally act as a facilitator between the buyer and seller, etc.
The main elements of housing sector which are directly related to demand are due to presence of demographic factors. However, there are other determinants as well, which are equally important, such as, availability of credit, preferences of the customers, factors related to incomes, etc. Demographic factors are related to size of market as presence of more consumers will lead to bring hike in demand. Other factors are rate of marriages, divorce and death that can give a clear-cut idea related to tremendous growth in overall population statistics (Wilcox and Perry, 2014).
Real estate market has been quite convincing in terms of inflating and deflating prices every day. It is due to changes in demand, supply and economic condition of the country. A tremendous decrease in the prices of houses has been noticed since the year 2009. As per the official statistics revealed by the government, the growth in house prices have fallen to 4.4pc in February, 2018 which is overall decrease of 0.3pc in comparison to January. It can be stated that on an average, there is a decrease in the growth rate of prices of houses by 0.1 pc per month. An annual decrease in the growth rate is 1pc (The Housing Market and Government Intervention, 2011).
In order to buy a house in UK, the average amount to be paid by the buyer was £225,000 which is £9000 expensive in comparison to what it was a year earlier. As per the research conducted by Royal Institution of Chartered Surveyor (RICS), a net balance of 47 pc surveyors has seen prices to fall situated in the city. Other decline in prices has been noticed in North east of England and East Anglia as well.
Researchers and economists have stated that due to Brexit negotiation going on between Britain and European Union, it has become difficult to analyse the rise and fall in housing market. It has made the prediction of real estate prices to be difficult. The manner in which housing prices are performing helps in ascertaining bigger picture of development in the form of wider economy and path of interest rates. Brexit, being a key factor of UK’s economy, hence it has major impact on prices prevailing in real estate market (Hodkinson and Robbins, 2013).
Role of the government in housing market
Government is able to put its interventions in real estate market in the form of subsidies, taxation, rental control, zoning, real estate legislations, price flooring and ceiling policies, transactions cost and other involved procedures, restricting the involvement of financial institutions in real estate market and licensing market participants. The choice of method adopted by the government may vary as per their prevailing economic condition of consumers as well as overall economy. The depending factors can be political slant of government in UK and level of institutional and economic development. Some countries also provide residence permit to the foreigner who are involved in investing in real estate market.
As per the current state of real estate in UK, the main concern of government is that there have not been enough homes in UK in order to meet the requirements of growing and aging population. The constraint has made the prices of housing sector of UK to be relatively stable for the last 3 years (Dowson and et.al., 2012). More than 15% of the total population of UK make use of private rented sector and figure is expected to get doubled in next 10 years. Hence, it can be stated that the elasticity of supply is quite low which requires amendments in prevailing laws and policies of the country. Some of the steps that have been taken by the government of UK to ensure proper home to everyone are:
- Encouraging self-building schemes: It is easy to adopt for self-building home techniques. This is considered to be a cheaper source for long run. It helps in providing satisfaction to the builders where they can build their homes as per their own specifications and design.
- Loosening planning restrictions: Government has initiated relaxation in planning aspect inclusive of loosening the laws and policies with respect to greenbelt restrictions, which was prevailing earlier (Clapham and et.al., 2014).
- Reduction in number of empty homes: Compulsory purchase order is one such method which can help in reducing the prevalence of empty homes in UK. If the owner leaves property empty for more than 6 months, in that case, it will be made available to people mentioned on housing waiting lists at a rent prevailing in sub market.
- Tax breaks: Government of UK has also relaxed taxes so that people can get their rented apartments at affordable prices (Swan and et.al., 2013).
Advantages and disadvantages of government interventions
Government interventions play an important role in understanding the market and take action in such a manner that economic condition of the market can be kept stable. Effective interventions can help in improving the operations of market. However, ineffective asset of actions can lead to ineffective market operations showing negative side of government interventions as well. One of the most important role of government in housing sector is related to controlling prices in such a manner that price ceiling and price flooring are not crossed by real estate dealers (Oxley and Smith, 2012). Hence, it can be stated that there is a direct relationship between prices and government intervention whose maximum and minimum are changed as per the current condition of the economy and average buying power and personal disposable income of individuals living in UK. Government can also put interventions in mortgage securities, availability of loan for buying a house, lack of availability of credit for new mortgages, etc. In such cases, action taken by the government by bringing adequate fluctuations in interest rates, can help in solving out the issue and reduce the same to minimum possibility (Harlock, 2013). Charging less amount in the form of insurance by regulating the insurance companies and inevitable steps for under-pricing the guarantee is the other common intervention policy used by the government dwelling in favour of people. Various actions plan can be implemented by the government in the form of subsidies to the home owners, lowering down interest rate of loans, making the renting legislative more attractive with the help of rent control interventions and creative more areas for affordable housing for people belonging to different economic tiers (Shrubsole and et.al., 2014). The main aim of government is to provide housing facilities to homeless by laddering through the interventions provided by them in order to promote housing and rentals.
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Analysing the alternative side of government interventions, the guarantee given by the government for purchase of houses is latent and uncompensated. Government sometimes take ineffective decisions that act as a barrier in growth and development of the sector. However, the strategies for promoting housing in the country also have negative impact on the economy of the country in the long run. Hence, some negative consequences can be borne by citizens of the country due to adoption of these factors (Bromley, 2013).
Role of government
Role of local authorities and its impact on UK housing market
Local authorities and communities tend to face a lot of pressure so as to provide significant future to housing sector of the country. Common involvement is required in correct housing offers and supporting house builder so that adequate amount of housing facilities is available to people. Local people tend to face various issues with respect to affordability of the houses. The landlords also have to make various decisions in relation with new development, renovation, investment, allocation and tenure, can help in shaping and offering them at areas of housing (Sunikka-Blank and et.al., 2012). Local authorities play an important role to coordinate with the demand of both landlords and rentals to ensure that interest of both the parties can be preserved in a manner that best framework of long and short-term outcomes for local area can be initiated.
An explicit and strategic approach in relation with tenure is created in such a manner that a management can be initiated with respect to rent levels, affordable and social rent housing stock. It is due to availability of proportion for tenancy is generally small. Understanding the prevailing market and taking actions based on it can help in framing better policies. Identification of trends in such a manner that interest of both tenants and land owners can be preserved. Better understanding of market is initiated through analysis of population and assessing their belongingness to a specific tier can help in preparation of rather more impactful actions. However, the role of local authorities and their decision making can be ineffective if appropriate steps are not taken by them after the situation of analysis (Killip, 2013).
Libertarianism is an important aspect to be known to local authorities as well. It is related to upholding liberty as a core principle and taking any actions related to housing sector, based on it. It helps in maximizing political freedom and anatomy. Hence, adequate emphasis is given on freedom of choice individual judgement, voluntary association and believing in individual rights that are directly related to it. Hence, it can be stated that having libertarianism to people help in providing affordable housing.
Description of landlords and their role affecting UK housing market
Landlords are the owners of house, apartments, land or other real estate which is rented to the other individual who are called as tenants. The person in juristic nature is commonly called as owner. They treat their real estate as a source of income and conduct their business through it. The private sector renting is generally governed by the act initiated by the government called, Landlords and tenants Act, 1985. It has all the rules and regulations that are required to be followed by the tenants and landlords. Rents can be increased by the landlords only after giving proper information about it to the tenants. Moreover, all the important policies and procedures must be mentioned in it which are required to be followed by both the parties during renting tenure.
The concept of corporate social responsibility has been able to gain adequate recognition in the housing sector due to adoption of new pattern of business (Cornforth, 2012). There are various CSR elements that are required to be considered in the housing sector. It has direct association to use of various environmental friendly elements, such as, landscaping, adoption of environmental friendly material for building new houses and getting them renovated, sustainable design of the building specially focussing on energy saving techniques, etc. There are other social amenities that are also required to be considered. These are, recreational parks, sports facilities, playgrounds, meeting places for the residents, near availability of schools, etc. Safety in the building and near to its surroundings are also required to be considered by the team while indulging in housing sector and building of new houses. Quality of the environment is another CSR element, inclusive of proximity to public transport, development density etc. Quality roads and finishes are the other two main factors of focussing on CSR.
Description to the statement “The Housing market cannot be left to the market”
The statement, “The Housing Market cannot be left to the market, implies that housing market can not be left alone and let it be the way it is. However, strong actions are required to be taken by government so as to ensure that all the important policies and procedures are followed by seller and land lords. It works on common principle that every individual requires home and it is his right to get it in the most adffordable prices. Hence, it can be stated that intervention from the side of government is important to be ensured so that rights and interest of the individual can not be compromised (Gibbs and O’Neill, 2015).
UK housing market have been quite volatile these days due to constant decrease in overall growth rate of prices of the properties available there. In such cases, it becomes important for the government and other local authorities to keep an eye over its happening so that better strategies can be promoted in this sector. UK housing is easily driven by Brexit negotiation, which is going on in the country. Hence, the prices are majorly fluctuating. In such cases, liberalised behaviour followed by the government can help in bringing adequate growth to this sector in such a manner that affordable housing facilities can be provided to the people belonging to all tiers of economy (Benbouzid and Mallick, 2013).
Not having any intervention from the side of government can make the industry volatile with no restrictions of prices and other aspects of this sector. It can also hamper the interest level of landlords and tenants to some extent. Hence, it can be stated that “Housing sector cannot be left to the market”
From the above report, it can be concluded that, Housing sector have been quite volatile since the negotiation for Brexit have been started in the country. The report discussed regarding importance and disadvantages of government interventions in such a manner that interest of landlords and tenants can be protected. The policies and procedures adopted by the UK government helps in ensuring that the prices of properties and other real estate does not go beyond price flooring and price ceiling mechanism. Government interventions play an important role in understanding the market and take action in such a manner that economic condition of the market can be kept stable. Hence it can be used by the government and other local authorities to bring control over the prices.
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- Wilcox, S. and Perry, J., 2014.UK housing review. Coventry: Chartered Institute of Housing.
- Hodkinson, S. and Robbins, G., 2013. The return of class war conservatism? Housing under the UK Coalition Government.Critical Social Policy.33(1). pp.57-77.
- Dowson, M. and et.al., 2012. Domestic UK retrofit challenge: Barriers, incentives and current performance leading into the Green Deal.Energy Policy.50. pp.294-305.
- Clapham, D. and et.al., 2014. The housing pathways of young people in the UK.Environment and Planning A.46(8). pp.2016-2031.
- Swan, W. and et.al., 2013. Adoption of sustainable retrofit in UK social housing.Structural Survey.31(3). pp.181-193.