Determinants for Demand in Private Housing

Determinants for Demand in Private lodgmentPrinciple determinants of lead for mystical caparison.The dominant factor is damage. Providing all of the bleak(prenominal) factors remain equal, one would expect a fall in price to ontogeny petition. This profit occurs for two reasons. Firstly, the product has become better judge for money and in that locationfore becomes a cullred atomic number 18a of expenditure for consumers. Secondly, it en adequates consumers to procure the product in electric switch of a previously purchased inferior product. family line Income. As incomes rise, so does the platehold purchasing power. Therefore, the consumer is better equal to(p) to bear with products. parallels. In incidence where, apart from price, thither is a direct equation between two products, as prices fall on product b) so consumers whitethorn substitute it for product a) where there has been no fall in price.Taste and preference. Consumer tastes and preferences change. These may be affected by outside sources such(prenominal) as promotion or peer pressure. In this event, such changes exit pee an effect on demand.Expectations. The perception of future changes in price ordain affect demand. If prices be expected to rise in the future, face demand leave alone increase, and visa-versa.Therefore, if it is expected that private house prices testament rise, but the present cost of purchase falls (i.e. mortgage wagess), because consumers in the main view property letting as inferior to private ownership, the demand for private trapping leave alone increase.Difference between supply of new caparison and manufactured goodsNew lodgmentThe picture of new lodging has limitations. The principle limitation is its wintry essence element, the land. Although there end be changes made in the use of land, for example from agricultural, it is a express mail resource that backsidenot be easily expanded. As a result, it is considered a fixed cost . Every individual product (house) give require a meaning(a) element of land for manufacture. The relative scarcity of the supply of land, this has the affect of change magnitude the cost of supply.Manufactured goodsThe supply of manufactured goods can be more than easily increased. Once the fixed costs atomic number 18 in place, i.e. property, specify and machinery, these are equally divided over the number of goods produced. An increase in the number of products manufactured will therefore reduce the fixed cost element per unit. For example, fixed costs of coulomb spread over 1,000 products will be one tenth of that cost if it is spread over 100 products.Comparison of affordability with effective demand for a productConcept of affordabilityThe image of affordability (Marshall et.al. 2000) in respect of property rental is threefold. 1) That such rental is placed at a take, which does not force the tenant into a do of poverty. 2) That it does not consume more than 25% of the tenants low-cost income and 3) that the les get a line is left with sufficient funds to be able to afford opposite basic necessities.Concept of effective demandThe impression of effective demand is based upon the premise that supply and price visits demand. Whilst taking into account the on hand(predicate) figure of consumers, effective demand works on the basis that increase of supply reduces cost, which enables lower price and therefore fuels demand.The motives for these concepts vary in that the affordability concept is based upon hearty precepts, whilst effective demand is based upon profitability and price. some separate(a) CriteriaThe criterion for assessing affordability is centred on five key issues.There take to be an effective analysis of the RSLs1 own rental levels. Such analysis should discover rent averages by authority area, levels as calculated in coitus to the type of property and the area in which the property is located.Comparison of rental levels w ith other RSLs.Comparison of rental levels with other rental organisations. For example, those in the private sector.By evaluation of the income levels and type of base, for example single parent, pensioners, families etc. starchy assessment. Within this issue, RSLs need to determine that households have sufficient income level to be able to afford the rent and still be able to achieve a certain standard of active. It is also needs to dish in reducing the reliance of tenants on other clears by providing them the opportunity to rejoin the employment marketplace.Other criteria that could be used overwhelm local anaestheticity of tenant to work concentration areas, which would reduce tenant expenditure and increase job opportunity.Expectation of affordable house schemesAn ideal affordable housing scheme should provide occupiers with reasonable living accommodation sufficient for the needs of the household unit, at the same time allowing a standard of living that provides for all their basic needs. For the provider who finances the scheme it should allow for a reasonable return on their investment, plus sufficient capital replacement to enable them to persist the provision of such housing.Learning Activity 10 give differential between houses and other household product requirementsSupply of houses differs from other products such as cars, white goods and luxury goods in that it is not as easily adaptable to meet demand. A car can be readily supplied and that supply rapidly replaced. This is not the position with a house. Here the supply source takes longer to react to any driveway in price, because of the motivation of the house seller. A number of factors that affect supply, such as the motivation of the occupier to sell. If they are satisfied with their accommodation and the location, they are slight likely to sell, limiting supply. Similarly, if they perceive prices will continue to rise, they will delay selling, a reverse effect will happen when house prices are depressed.Houses completedThe chart above for the most part shows that the increase in house prices has not been met by a significant rise in the level of new builds, in fact, House builds supply has remained at a similar level throughout the ten years from 1995.If one cherished to construct a genuine graph for new house other data would be required, including variety of construct, for example flats, houses etc, and take into account the race demographics.Learning Activity 12ScarcityScarcity occurs inwardly the social housing market where there is a lack of availability of the core element of house building, namely the land, and where house occupiers do not set up their houses up for sale.Opportunity costMany landlords have seized the opportunity of change magnitude their housing stock during the periods of deflation or housing slumps. In such cases, there is a need to weigh this cost against future gains.The conditions of demandIn the housing market if the pr ice is right and compares favourably with other housing options, such as renting, and that price is within the budget of the householder, therefore they will purchase a property. This is generally the preferred route of households.The conditions of supplyTo conditions that determine supply is the availability of products, in this case houses, at the right price. Supply will also be affected by the future expectations of the market in terms of price.Perverse demand behaviourIn the housing market the major action that perversely affects demand is the substitution behaviour. Consumers generally perceive house ownership existence preferable to renting and will therefore seek to move to this status as soon as is possible.External effectsSeveral external situations affect the housing market. These include the inability of young people to get onto the property market changes in employment conditions and types of households. Similarly, issues such as planning and taxes will affect the mar ket supply and demand.Sources of inefficiencyInefficiencies within the housing market, particularly with social housing, where results of data analysis do not take into account all of the relevant factors and the resources are not being used to create the maximum economic welfare..Sources of unfairness issuesIn law can arise in the housing market because of the house-building computer program failing to keep pace with the rate of demand.Monopoly powerMonopoly power exists where there is no alternative to the product cost or the method of acquisition. It gives a monopoly the ability to affect the price of their product without reference to market trends.Nostradamus admit AssociationNostradamus is a social housing organisation. They are faced with a situation of reduced tenancy as a result of mortgage place being reduced to a level where repayment are at a significantly lower level than the tie beam charges. The occupancy issue is exacerbated by the fact that the council has tran sferred its housing stock to another association. menstruation research shows that the trend in the move to ownership is likely to continue for the near future. Therefore Nostradamus have decided to sell off their tautological stock, under a right to buy scheme, in order to advance its worsening financial position.HA RentedHousingOwner-occupiedHousingLow cost housingReduction of mortgage rates change of housesOwnershipRight to buyWithin the case study presented, we see that the association is operating a system of allocative efficiency, in that the sale of their houses benefits them by reducing their financial difficulties, thereby make the business more efficient. It is straightforward to both parties, as the association benefits by reducing its financial difficulties and the occupier benefits by acquiring a property at a cost, which is less than they were previously paying.It is found that owner-occupied housing is also provides equity, as it assists with the statistical dist ribution of wealth between individuals who were previously disadvantaged. Thus, the association is also fulfilling its role in economic welfare.DeterminantsOn DemandOwner-OccupiedHousingMarket price of productRent exceeds mortgage payments, therefore exceeds market priceLevels of household incomeIncomes have improved as the region is recovering economicallyComparable pricesThe cost of ownership is under that of the rent being charged making rents no longer comparableTaste and preferenceGenerally consumers prefer ownership, seeing renting as of lower social standing.ExpectationsThose who are locomote to ownership expect to benefit from better neighbours.The sale of redundant houses by the association does give rise to a number of objurgations in admittance to the fact that these were transferred from the local council. One of the most important criticisms is that it leaves the association with a much lower stock of houses, thereby it would be ill alert to be able to provide hous ing for those who need social housing, should the local economy suffer a future reverse of fortunes in the future. A further criticism is that such houses could have been utilised to reduce the difficulties being experienced in other areas of the country. With areas such as the South atomic number 99 suffering shortage of low-cost housing for rent or sale, there could have been some relocation effected to have reduced this difficulty. This would have also have had the effect of assisting those in need in those areas by providing them with the opportunity of possible work as well. Furthermore, by selling the houses below the original cost, the association can be said to have employ council funds. These funds essentially would have been provided by the members of the local community, through the payment of local taxes.As a result of all of these issues, a criticism could be levelled at the association that it failed in its duty of social dispense and welfare by not undertaking a st udy of other possible ways in which it could have utilised the excess housing stock and, at the same time, addressed its financial issues.The social dissymmetry could have been addressed in other ways. Primarily, it could have been offered to the government at an equitable rate, for use in lot them to address local and national homeless problems. This would have satisfied the issue of welfare. Secondly, the association should have looked at the possibility of reducing the rate of its rent to that which would be comparable with received mortgage payments. This would have led to higher levels of occupancy and increased the income of the association, thus reducing over time the level of its cash flow difficulties.The ordinal way of reducing the social imbalance would have been by helping to address the issues that first time buyers suffer, namely not being able to gain entry into the property market. In line with other organisations, the association should have looked at the poss ibility of a Rent and Buy scheme. infra this scheme, the buyer purchases part of the property equity and the association purchases the balance, for example, the buyer may buy forty percent and the association sixty. Over the years, and as the buyers income levels rise, under this scheme the buyer would be able to then purchase the remainder of the property equity, on an instalment basis, from the association. These future equity purchases would have been at current market rates. This would have had the additional benefit of enabling such people to be able to remain within the location of their choice, close to families and their work environment.AccountingIssuesIndicatorsLoss of IncomeIncreasing turnover rate of tenants.Rentals too highReduction in ownership mortgage ratesImprovement in local incomesHousing turnover exceeding budgetTenants attracted by ownershipRentals too high.ReferencesMarshall, D., Grant, F.L., Freeman, A. and Whitehead, C (2000). Cambridge Housing and Planning Research. Retrieved 12 October 2006 from http//www.dataspring.org.uk/Downloads/Discussion Paper 2.pdfLive Tables on Housebuilding (2006). Department for Communities and Local Government, Retrieved 11 October 2006 from http//www.communities.gov.uk/index.asp?id=1156032Demand and Supply for housing (2006). Tutors2u. Retrieved 12 October from http//www.tutor2u.net/economics/content/topics/housing/housing_demand_supply.htmResearch Project. The UK Housing Market. biz/ed. Retrieved 12 October 2006 from http//www.bized.ac.uk/current/research/2004_05/090505.htmFootnotes1 Registered companionable Landlords