99-handout

99-handout - 1 Housing and the UK Economy Housing and...

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Unformatted text preview: 1 Housing and the UK Economy Housing and Economic Activity Asset prices have grown in importance Millions of jobs linked directly or indirectly to the property / construction sector construction sectors Strong household wealth effects on Consumer borrowing and demand Living standards of pensioners Incentives to save Changes in house prices and activity have huge effects on the allocation of scarce resources in the UK economy 2 Background 0ver 70 per cent of homes are owner occupied Last ten years has seen a surge in buy to let investments (property as a speculative investment) Mortgage is perhaps our biggest financial commitment Construction accounts for approx 7% of GDP Housing related spending is perhaps 15% of AD Strong multiplier and accelerator effects when the property sector is expanding but these can go into reverse UK housing market is more vulnerable than others to price volatility and the risk of property bubbles (i) Majority of loans are on floating (variable) interest rates (ii) Low price elasticity of supply of new housing A recession of sorts but now recovering Average prices in pounds sterling United Kingdom, Average House Prices 300000 350000 300000 350000 150000 200000 250000 Average price for each region, s 150000 200000 250000 London UK N Ireland Source: Nationwide Building Society Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 98 99 00 01 02 03 04 05 06 07 08 09 50000 100000 50000 100000 Wales 3 Real house prices Index, 1991=100 House Prices - Consumer Prices and Wages 350 400 350 400 200 250 300 Index 200 250 300 House Prices Source: Reuters EcoWin 97 98 99 00 01 02 03 04 05 06 07 08 09 10 100 150 100 150 Wages Consumer Prices Affordability is key to driving demand Monthly data, source: Halifax house price index Housing Affordability - UK house price/earnings ratio 5.5 6.0 5.5 6.0 4.0 4.5 5.0 Ratio of house prices to average earnings 4.0 4.5 5.0 Source: HBoS Housing Research 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 3.0 3.5 3.0 3.5 4 Can first time buyers get into the market?...
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99-handout - 1 Housing and the UK Economy Housing and...

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