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Different Factors Affecting The Supply and Demand of Housing

This document discusses several key factors that affect the supply and demand of housing: For demand, the main factors listed are affordability, consumer confidence, interest rates, population and demographic changes, mortgage availability, economic growth and real incomes, and the cost of renting. For supply, the factors mentioned are the number of new houses being built, planning restrictions on land use, local opposition to new construction, and the profitability of building new homes.

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Khea Micole May
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163 views12 pages

Different Factors Affecting The Supply and Demand of Housing

This document discusses several key factors that affect the supply and demand of housing: For demand, the main factors listed are affordability, consumer confidence, interest rates, population and demographic changes, mortgage availability, economic growth and real incomes, and the cost of renting. For supply, the factors mentioned are the number of new houses being built, planning restrictions on land use, local opposition to new construction, and the profitability of building new homes.

Uploaded by

Khea Micole May
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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DIFFERENT FACTORS

AFFECTING THE SUPPLY AND


DEMAND OF HOUSING
FACTORS AFFECTING DEMAND

• Affordability
• Confidence
• Interest Rates
• Population
• Mortgage Availability
• Economic Growth and Real Incomes
• Cost of Renting
FACTORS AFFECTING DEMAND

AFFORDABILITY
Rising incomes mean that people
are able to afford to spend more on
housing. During periods of
economic growth, demand for
houses tends to rise. Also, demand
for housing tends to be a luxury
good. So a rise in income causes a
bigger % rise in demand.
FACTORS AFFECTING DEMAND

CONFIDENCE
Demand for houses depends on
consumer confidence. In
particular, it depends on people’s
confidence about the future of the
economy and housing market. If
people expect prices to rise,
demand will rise so people can
gain from rising wealth. In a
boom, demand for houses rises
faster than incomes as seen in the
graph above.
FACTORS AFFECTING DEMAND

I N T E R E S T R AT E S
Interest rates play a big factor in
determining the cost of mortgage
interest repayments.
FACTORS AFFECTING DEMAND

P O P U L AT I O N
A very important factor. It is not
just the number of people but
demographic changes. e.g.
growing number of single people
living alone has led to increasing
demand for houses.
The demand for housing doesn’t
just depend on the population but
also the average size of a
household.
FACTORS AFFECTING DEMAND

P O P U L AT I O N
Certain social and demographic
factors are causing a rise in the
number of households (faster than
the population increase). These
demographic changes include
issues such as:
• age of people leaving home
• Increased life expectancy,
leading to more single old
people
• Divorce rates, – increasing
number of single-parent
families.
FACTORS AFFECTING DEMAND

M O RT G A G E
AVA I L A B I L I T Y
• Another factor that determines
the effective demand for
houses is the willingness of
banks to lend mortgages. If
banks give mortgages with
bigger income multiples, then
the effective demand for
houses is greater. The
willingness of banks to lend
mortgage finance can vary
depending on the strength of
the interbank lending sector.
FACTORS AFFECTING DEMAND

ECONOMIC GROWTH
& REAL INCOMES

• Rising incomes enable people


to afford bigger mortgages and
encourages demand for
housing. In boom times,
demand for housing grows
rapidly suggesting demand for
houses is income-elastic
FACTORS AFFECTING DEMAND

COST OF RENTING

• If the cost of renting rises,


then households will make
greater efforts to try and buy a
house as buying a house
through mortgage becomes
relatively cheaper.
FACTORS AFFECTING SUPPLY

• The number of new houses being built.


• Planning restrictions on the use of land
• Local opposition to new home builds
• The profitability of building new houses

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