Last edited 22 May 2019

Housing market

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Contents

[edit] Introduction

The housing market stock includes privately-owned houses and apartments, privately rented and public-rented accommodation, as well as housing association property.

The term ‘housing market’ is used to describe the state of all transactions in a particular area concerning the buying and selling of homes, whether private- or public-sector. It will encompass things such as finance, interest rates, confidence, mortgages, and supply and demand.

A major factor influencing the housing market is the level of confidence that exists around the buying and selling of homes. Thus, a depressed market will not only involve fewer house-buying transactions and possibly lower house prices, but also low investor expectations for the short – and possibly medium - term.

[edit] Factors affecting housing market health

[edit] Interest rates

When low, mortgages will be cheaper and so more desirable. They will remain cheap if the economy is weak, with no or fewer hikes in interest rates. High interest rates increase the cost of mortgages, deterring some buyers from entering the market.

[edit] Supply - the number of homes being built

Like all markets, housing is affected by the interplay between supply and demand. When the supply is high, prices tend to be lower and vice-versa. If not enough homes are built over an extended period, the result could be an acute shortage of homes and a rise in the number of people renting.

[edit] Economic growth

Higher economic growth usually brings rising incomes, with more people having more money to spend on housing, increasing demand and pushing-up prices.

[edit] Mortgage availability

When banks and other lenders tighten mortgage availability, housing market activity becomes depressed and demand drops.

[edit] Affordability (house prices/earnings ratio)

The more take-home pay is spent on a mortgage, the more unaffordable housing becomes. This can be a deterrent to potential buyers. Affordability is a much-discussed subject and potential buyers are acutely aware when homes are unaffordable.

[edit] Location

Location always has a huge influence on desirability and therefore price: a sought-after area may not be subject to the fluctuations experienced by other less-desirable areas.

[edit] Stamp duty

When it is low – or non-existent depending on the home price – more buyers will come into the market.

[edit] Confidence

Market confidence may act as a brake on growth. The housing market will likely only pick up when confidence returns.

[edit] Related articles on Designing Buildings Wiki