The Impact of British Home Builders on the Economy(1)

英国Dissertation代写论文精选范文：“The Impact of British Home Builders on the Economy(1)”，这篇论文主要探讨了过去五年英国住房市场供需基础设施内发生的情况，以及未来五年可能会对其造成的影响。

Supply & Demand Factors

Simply put, a rise in a commodities price will cause a contraction in its demand; similarly a fall in price causes an expansion of demand. However, increasing the demand by a means other than price causes a higher level of demand at each and every price level, the aggregate of increased demand and an inelastic supply causes a sharp rise in market equilibrium price, this is the UK Housing Market (Fig 2).

Fig 2 Demand Curve illustrating an increase in Price P causing a contraction in Quantity demanded Q, however increasing Demand from D1 to D2 increases demand at each and every price level. Source Wikipedia.

Below are social and political factors that affect the supply and demand curve for a traded item. Though this report doesn't have the scope to cover every factor in detail it will deal with those which are felt to be most pertinent in today's environment.

Demand Factors

Income

Interest Rates

Population Structure

Price of Substitute

Price of Compliment

Taste/ Fashions

Quality

Level of Population

Advertising Publicity

Consumer Expectation

Supply Factors

Planning Regulations

Output

Price

Government policy

Family Circumstances

Employment

Land

Labour

Capital

Factor Incomes

Demand Factors

Income

Fig 3 (a) Average of the Halifax and Nationwide measures from 1991 onwards. Prior to that, the Halifax measure is used as the Nationwide measure is not available at a monthly frequency.

The published Halifax index has been adjusted in 2002 by the Bank of England to account for a change in the method of calculation. (b) Average house price divided by average annual earnings. Average annual earnings based on the 2007 annual survey of hours and earnings (ASHE) and the average earnings index (AEI).

Income is an enabler, the higher a persons salary the greater the potential purchasing power and available amount to borrow. In the past, income has grown broadly with inflation (source ONS), and until the 1980's house prices have thusly followed suit. However, increasing competition in the finance sector since the mid 1990's saw >100% mortgage products being offered, for the last five years house prices have been in excess of the salary multiplier (see Fig 3), thus allowing people who couldn't normally buy a home to side step the traditional bottle-neck of saving for a deposit, this in turn has added pressure on a largely inelastic UK housing stock when the number of newly built private & social houses are in decline.

Interest rates

Fig 4 Changing Bank of England Base Rate over time
The last 5 years have seen historically low interest rates (2.0% at the time of writing Fig 4), which until recently has fluctuated around 5% making conditions for property investment quite favourable. This trend has been halted however by uncertainty in the money market, as banks continue to uphold Libor against a back drop of a falling Bank of England base rate. The interest rate is the government's monetary policy tool which operates through the independent Monetary Policy Committee (MPC) to keep inflation stable and attempt to maintain steady economic growth. A high interest rate reduces demand for housing by deterring long term borrowing and credit dependence. It is termed by some economists as a blunt instrument and likened by Keynes, in The General Theory of Employment, Interest and Money, to "pushing on a piece of string" (Larry Elliot, Guardian 18/12/08), as the affects of rate changes can be far reaching but slow to act; it is however commonly held to be the most effective way of maintaining long term economic growth (Biz/ed).

Population Structure

The UK is seeing an increasing trend as in many western economies as standard of living improves (c.f. GDP), so does average life expectancy, an ageing population means not only increased cost to the state in both healthcare and pension draw down, but also longer for those homes to re-enter the housing market. This factor is only likely to increase in the future given advancement in medical science and projected standard of living.

Price of Substitute:

The simplest alternative to buying a house being renting, the last 5 years have been a boom time for the buy to let mortgages, increasing in number by over ten times in eight years, see the following excerpt from Mintel (Buy-to-Let - UK, March 2008);
in 1999 there were just 73'000 buy to let mortgages outstanding but by 2007 this number had mushroomed to around 1'040'000. Annual buy to let business has grown by more than 30% per annum on average from 1999-2007.
Renting a property allows greater flexibility for people to work in different locations without a permanent form of tenure; it equally provides a solution for those with mortgage affordability issues, personal preference in housing type/location, or simply providing a stop gap for those who have undergone separation or divorce. If this trend continues it will make it very difficult for first time buyers to make their first step on the property ladder often as buy to let mortgages require a larger deposit (circa 25-40% Mintel) they tend to be taken up as an investment for those with diminishing final pension aspirations.

Supply Factors

Planning Regulations

Planning is known to be a lengthy process which for large infrastructure items often requires lengthy periods of public consultation. These in some cases tend to meet with insurmountable appeals through NIMBYism. Easing the complicated planning process would be one (perhaps unpopular) way to increase supply. Much blame for the shortfall in supply has fallen at the feet of planning departments, this was particularly evident in both government commissioned reports by Kate Barker, most notably a member of the MPC and ex chair of the CBI. The summary of her first report in 2004 recommended building 120'000 more homes in the private sector to achieve a net reduction of 1.1% in house prices and to implement a tax on land sales sold for residential purposes. Somewhat counter-intuitively her second report asserts several recommendations focussing on making the planning framework as efficient and effective as possible, appearing to favour economic growth over social impact. If uptake of the reports recommendations are legislated these may facilitate increased housing supply, though it is the opinion of some in the green lobby that it could pave the way for 'big business' via the back door, see to conclude the FoE's response to the second reports publication:
Friends of the Earth is concerned that the Treasury's agenda, in reviewing the planning system, is to elevate the needs of businesses and the goal of economic growth at the expense of the environment and the views of the public. The Barker 2 Review threatens to dismantle an important regulation that protects the public interest and gives people the right to take part in decisions that affect their daily lives. The Treasury must wake up to the important role that the planning system plays in delivering development that works for people, their communities and the environment.

Government Policy & Regulation

As mentioned in planning the government has commissioned studies to increase supply of private housing by freeing up land for development through planning. It's July 2007 Green Housing paper further committed it to increasing social housing by 45'000 units per annum. Thus it appears Labour are almost seeking to reverse the large sale of council houses that occurred throughout the 1980's under the right and its own failure to act from Blair's 'wasted first term' onward. Vince Cable the Shadow Chancellor for the Lib Dems believed the government were incorrect in cutting VAT when they could have been boosting social housing spending, see his response to Chancellor Darlings PBR:
The Government make a great deal of the fact that they propose to bring forward ￡800 million of expenditure on social housing. We want to see more expenditure on housing; it is highly appropriate in this context, and that kind of money would buy about 6,000 houses in the current economic environment. However, the Government said two years ago that they had a plan for social housing costing ￡8 billion. What happened to it?
Constructing housing would not harm the UK's balance of payments as the majority of items used in construction may be sourced from within the UK. A long period of sustained house building could eventually bring down the average house price freeing more money for the high street as an alternative to unsustainable cuts to VAT.

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