UNIVERSITY OF GLOUCESTERSHIRE

SCHOOL OF BUSINESS AND LAW

MBA-1 (GROUP-D)
MODULE: SAIM
NAME: Nikunj Patel
STUDENT NUMBER: 0661SWSW1109
INTAKE: April 2010
Email: nikunjrpatel1986@yahoo.co.in
LECTURER: Eally

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 PROJECT CONTAIN…

1. Introduction........................................................................... 3

2. Factors affecting to housing market...................................... 3

3. Background of the study........................................................ 6

4. U.K housing sector for 2010, According to Nationwide and

Halifax.................................................................................... 8

5. Housing market in “Spring Bounce”...................................... 8

6. Government policies affect House price................................. 9

7. Arrears, Repossessions and Homelessness............................. 10

8. Private Rented Sector.............................................................. 11

9. Conclusion.............................................................................. 11

10. References and Bibliography................................................. 12

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INTRODUCTION:
United Kingdom is one of the biggest economies in the world. So mortgage house and buy
house in the u.k is more typically to afford rather than another region. As per last two years
housing market up and down because of economic growth upward and downturn. Also
interest rate high applied by bank of England. House of price in the UK now day by day goes
up. For the reason being in 1990 housing price very low. And fact house price nearly to
afford to people. Over past left these situation but now very difficulties to get on the property
as a homeowner and property ladder have been left with s seemingly impossible task.

FACTORS AFFECTING ON HOUSING MARKET:-

1.DEMAND AND SUPPLY: house price is most important factors for a house buyers to
make purchase lower price will be purchased and higher price demanded will be less in sense
that fundamental factors to rising house price. When housing price fall so automatically
demand all adversely
2.INTEREST RATE: interest rate base on the bank of England. If interest rate rise in the
market than mortgage. Lenders will increase the cost of mortgage payment. High interest rate
to falling to mortgage lenders to buy a house. Interest rate very important in U.K because
variable mortgage lenders a payment is decided on the Basis of income .a little change in
interest make big impact on cost of mortgage.

According to market oracle researches says majority of the people believed that interest
rate has been decreased since commencement of the running financial crisis. According to
market oracle researches majority of the people believed that interest rate has been decreased
since beginning of the current financial crisis.

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Generally in the U.K some housing agency cut the interest rate or increase in base rate to
their customer. Last two years data of bank Halifax, Liyodstsb, Nationwide, Abbey that own
mortgage rate move to line with the bank of England’s base rate. Mortgage lenders borrowing
money from the financial markets. A lender tries to decrease mortgage rate and raising the
mortgage fees from agency lenders.. The financial crisis has caused the liquidity problem in
the financial markets and owing to the shortage of funding as contrasting to its high demand
the cost of borrowing has been controlling up. In this situation, many lenders tend to decrease
mortgage rates but to raise mortgage fees which vary lenders to lenders. Due to the
complicated nature of the market, many deals at fixed, follower, discounted and capped rates
are on offer in the market and diverse rates are being charged based on house value and
period of time. On the one hand, lenders tend to cut standard interest rates but on the other
hand they are raising mortgage fees and uneven mortgage rates to maintain their profit

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margins. According to Bank of England report (2008b), it has cut its main interest rate by .025
percentage points to 5.0% in an attempt to keep the mortgage rate low as mortgage lending
has shrink under the impact of the financial crisis in the financial market.

3.DEMOGRAPHICS: with more population and migration, number of consumers increasing

demand for house. So in particular Europe union, Poland, Romania are boosting the U.K
population that will lead to increase in demand. A number of household in the U.K and it’s
faster than Demographic .some region population more and village and underdeveloped area
population high. Due to unemployment people don’t like to live alone they want to with live
their family. And they want specific government flat, council house or special benefits for
home, because of the cant affordable to buy house.
4. ECONOMICAL GROWTH: an investment generates income as well as increase
productive capacity. In this manner the stock of capital can be increased by an investment in
order to utilise this increasing productive capacity at maximum level. If it is done, the goal of
growth with stability can be achieved but is very difficult to be able to afford to buy house
.past few ratio of house increase but in the same manner opposite side other factors are at
work as well.
The figure show that whenever U.K economy influenced by the financial crisis along with the
housing sector was also affected in same manner. According to oxford economist, the short
explanation of U.K housing market during recession of 1980, 1982, 1992 1998 and 2000 to
2010 have been described. Also this graph of GDP, it can be identified also weakness of the
economical condition in the U.K.

GDP
8

4
GDP
2

0
8 0 82 84 86 88 90 92 94 96 98 00 02 04 06 08
19
-2 19 19 19 19 19 19 19 19 19 20 20 20 20 20

-4

Graph - Data resource: Bureau of Economical Research (BER)

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Above figure of housing market have been compared with U.K GDP rate since 1980 to 2010,
identify or to get information about U.K housing sector during recession and explosion.

5. MORTGAGE INDUSTRY: This factor is very affecting to house price in the U.K.
subprime mortgage market when central banks had to provide liquidity to the banking
system. This credit has affected to Europe, US, Australia, Asia, and U.K.the word subprime
refers to mortgage who are not able to meet the criteria for prime mortgage rate because of
their poor or no credit histories. For example: outstanding payment, charge off, bankruptcies,
low credit scores, large existing liabilities, high loan to value ratio etc.
6. LOCATION: the location is main adversely affected to U.K house price because of by
geographical region, and even different part of London or its depends upon house price can
vastly.
7. UNEMPLOYMENT: U.K unemployment rising over 2 million since last December but its
published in march-2010.forcasting of unemployment in the U.K rise to 2.6 million by April
2010.because of recession factors affecting to economy. Also they predict GDP 3%
increasingly respectively during 2009.and current year financial crisis its boundaries by
3,000,000 by ending this year 2010.some Economist believed that unemployment will have
downbeat crash on property prices. Some researchers predict unemployment reach as high 3.5
million end of this year. If this happens it will have negative shock on property price. We
expect that higher rate of unemployment to downward to snatching to property price over the
winter.

According to the office for National Statistics U.K unemployment rate is 8%, therefore this
unemployment U.K housing market at 15 month left from period of stabilising in nominal

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terms. End of this 2010 year should move away ,by neat 2011,year unemployment should be
more rising it will be bad effected on property price

BACKGROUND OF THE STUDY:

In the survey of U.K home council,10% U.K people response via questionnaires .they says in
report U.K house price 72% decrease while rest of 23% people believed house price
decreased because of financial crisis or lot of factors affecting to housing market. An Oxford
Economics report (2008b) announced that housing market decreased in last couple of year
and its affecting to lenders and buyers. House price low by 10% or more since decreased last
year 2009. And also researches tell to in that report housing market will be fall down by 15%
to next 4 to 5 years. Financial crisis change in the housing sector has been big difference
between mortgage credit and its demand. Financial crisis in 2009 is reflected here by a point
in the extend flanked by the bank of England base rate.
Correspondingly, project published by nationwide, housing market in the U.K decrease 1.8%
by every month. At that time yearly decline brings house average price to £175,315.almost
£20,000 more, compare lowest level price since last year 2009. In that reports Economist says
that housing price in the U.K have further to fell as figure showed for homes more than 15%
and also Economist predicting further fall of more than 20%. With some commentators
predicting further fall of more than 20%.

According to the nationwide, building society 2009 data, house market decreased quietly and
affecting to all sectors like financial, banking, economic growth, employment in the U.K .but
annual percentage change in other city. West midlands, east midlands, north-west Yorkshire,
Scotland, Wales and Humberside were between 5% to 7.6%, i.e. -5%, 51%,-5%, 5.3% and
5.9% respectively. With the highest percentage change in wales,-7.6%.

DIAGRAM
The UK Regional House Prices (Q2-2010)
(Annual percentage changes)
ev
el
L

1
0.6%

0
Scotland
North East London
-1
Midlands
South East South
West West
-2
Yorkshire & Midlands
Humberside -2.3%
-3
North West East Anglia -3.1%
-3.6%
-4
-4% Page 7 of 13
Wales

-5
-5% -5.1% -5.1%
-5.3%
-5.9%
 Highest Annual % change -7.6%
-8

-9
(Data source: Nationwide- Q2-2008)

Unexpectedly average housing market change in Scotland continues to be lower than the
U.K, housing market in Scotland still change in positive manner. And also compare with
different part of the U.K, which is up by 0.6%.

U.K HOUSING SECTOR FOR 2010, ACCORDING TO NATIONWIDE

AND HALIFAX:-
In economic terms of labour debt over the boundaries .the new government policy is awake
for deep cuts in an achieved to goal £156 billion gap between government revenues and
expenses with low payment of £62 billion and government announce another £24 billion to
come on top of tax increase including goes up VAT from 17.5% to 20% to increase increased
by £25 billion different type of taxes. But still U.K housing market 10% from the depth of
march bear market low as the Halifax and Nationwide start to reporting house price data,
while both continuing with a optimistic pain.
 Britain’s largest Halifax mortgage provider, published in their report:
The Halifax house price index decreased by 0.4% by May 2010, and raising by
6.9%on yearly basis. Martin Ellis, Halifax housing market economist,” the diverse
outline of monthly price increased and falls so far current year is consistent with a
slowing market, and is in line with our view that house prices will be flat during 2010
as a completed year.
 The Nationwide report:-
The U.K housing market increasingly 0.5% in may to £169,162 to steady 9.5% below
the 2007 peak. Martin Gahbauer, chief economist at nationwide said “housing market
conditions stay on characterised by thin transactions volumes and a relative lack of
properties for sale, even with a slow return of more sellers in current months. The

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 current supply-demand balance on the market is still reliable with fairly stable to
diffidently upward trending prices.

HOUSING MARKET IN “SPRING BOUNCE”:-

According to national association of estate agents (NAEA),the number of people trying to
buying and selling house in this low market and number of sellers increased the last 6 months
and the number of buyers went up 7% last month. The NAEA said spring had bought and its
activity increase, and give it to better idea for sales and improving to activity of buyers.
“Spring has finally at home and brought with its much needed enhance to the housing market,
particularly among sellers, said Gary Smith of the NAEA.”
According to Royal institution of chartered surveyors (RICS)those people work with estate
agents a lot of people trying to sell their homes last month had reached to highest level since
may 2007.According to NAEAs survey. The average no. Of homes for sale at each of its
members branches increase from 56 in February to 60 in March.
“With the bad housing market now after us buyers and sellers similar are recurring to the
market with changed drive. “it added by NAEA.

GOVERNMENT POLICIES AFFECT HOUSE PRICE:

Government try to could control house price. But they have unsuccessful in this mission.
Also bank of England set the interest rate .they can’t change without check what demanded
housing sector in country. But still interest rate collision on house prices.

TO sensible house price rises they could:-

 To expansive higher stamp duty
 Mortgage lenders to restriction to mortgage another houses
 Saving in bank make higher ratio of deposit
 The MPC could move up interest rates.
 To constructed to new house plan.
Another way Government try to house price falling in the U.K:-
 Bailing out banks and Encouraging them to lend (RBS, northern rock etc.)
 Also reduction in VAT and tax on the mortgage of house could limit the extent of
the credit crunch

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  The MPC is significantly decreasing interest rate to make borrowing cheaper. Also
Government policy force on the all U.K bank privatization and Non-privatization to
pass these rate cuts on.
Government policy effectively and efficiently affected to house price in the U.K.people think
they have puffed up and banks don’t want to borrow. So whatever government try to done. It
doesn’t make any diversity. Many time government subsidies are available for household
investing in home improvements designed to reduce energy utilization.1980-Housing act
gave local influence tenants the “right to buy” their home at discounted prices.

The U.K housing market problem with shortage of supply in comparison of last year. Number
of house built, some of the government policy to help increase the supply of house.

 Lost Legislation about building on green belt hands:

The government give to builders to take land and build house protected by the environment
and to build a house without population. It is possible to meet opposition from pressure
groups committed to protecting the environment.
 Building of Council House:
This factor also supporting in increase stock of house. The government can build the house in
areas where they most must needed, in the same reward government can get rented income
and its helpful to public sectors workers.
 Encourage Geographical Mobility:
There is a number of house shortages in the Yorkshire and south-east.it is very affordable and
easy to build house in the north side. Government Encourage to builders to move in that areas
and to make improvement in underdeveloped area.

ARREARS, REPOSSESSIONS AND HOMELESSNESS

- Mortgage arrears by extent of arrears (UK, 1996 to beginning of 2010)

Source: FSA

 FSA published boost in mortgage debts in the UK, though not yet shut to the levels of the
start 1994s
 The FSA predicting if the house price decreased by 40% than the end of 2008, over 2.6
million residential mortgage owners and 450,000 buy-to-let mortgage owners will be in
unenthusiastic equity.

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Mortgage possession orders made in London courts

Source: Ministry of Justice

 Ministry of Justice bases on repossession cases in London courts show a tripling in the
number of control orders made between 2004 and 2008 with a level off since then.
 The number of properties actually repossessed is always lower than the number of
property orders made. The CML estimates that 50,000 homes were repossessed
nationwide in 2008 and 66,000 will be in 2009.

Rate of statutory homeless acceptances (London and England)

Source: CLG
 New cases of statutory homelessness had been falling in both London and the rest of
England since the extensive introduction of homelessness avoidance policies in 2006,
albeit less consistently in London.
 To date the number of new homeless acceptances has not been significantly affected by
the housing market downturn and wider recession.
 Mortgage arrears are cited as the main cause in just 2 per cent of homeless acceptances in
London, and 3 per cent in England as a whole.

PRIVATE RENTED SECTOR:-

Source: GLA
 According to GLA published in their report Average rent were relatively static in
London between 2007 to 2009 and later on house price steady until late 2010.
 The most recently rental index from finaaproperty.com report that average rents in
London decrease 0.9% in may, in opposite way increase in rest of part of England.
 According to findaproperty.com also report that the number of properties available to
rent and hire in London has risen steadily throughout first half of 2010.and now
70%higher than a year ago, owing to homeowners being unable to sell their properties
in a difficult sales market and deciding to let them instead.

CONCLUSION:-

The current financial crisis to reaching high volume of economy and has caused to economic
growth in the U.K according to oxford economist researches financial crisis affecting not
only housing sector but also financial, stock market and manufacturing sector as well. The
affect of the financial crisis have directly or indirectly, completed days tougher for millions
of people and lack of fund also affecting to consumer expenditure in retail businesses.

The U.K housing market has been hit by the financial crisis and mortgage facility provided in
the U.K a lot finance company in London they are now over. The Housing market in the U.K
largest mortgage provider reported to Government they loses buyers day by day in millions
property in U.K now sell is to low and new built home to stop the progress of until the
overload supply of homes is sold, and it will take few month. The house price decreased to
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the record level in all city in the U.K with highest decreased in Wales. Gross Mortgage
lending and net mortgage lending cancelled ,though gross advance in the mortgage market
have decreased in consumer finance, because of lack of funds, and U.K are reducing credit
limit of their customers.

REFERENCES AND BIBLIOGRAPHY:-

Land Registry House Price Index: www.landreg.gov.uk/houseprices/

U.K Housing sector for 2010 According to Nationwide and Halifax: -

http://www.marketoracle.co.uk/Article20121.html

U.K interest rate forecast 2010 and 2011:-

http://www.marketoracle.co.uk/Article16450.html

Bank of England statistics: www.bankofengland.co.uk/statistics/

Oxford Economics, Economic Outlook—UK Overview, (2008a), “Credit Crunch Bites
Harder”, Source: Oxford Economics, Volume 32 Issue 2. Page 3-4, retrieved July 18th 2008.

Halifax House Price Index:-www.lloydsbankinggroup.com/media1/research/halifax_hpi.asp

Financial services Authority www.fsa.gov.uk

Home Builders Federation www.hbf.co.uk

CLG statutory homelessness statistics:

www.communities.gov.uk/housing/housingresearch/housingstatistics/housingstatisticsby/ho
melessnessstatistics/publicationshomelessness/

Government policy towards the housing sector:-

http://tutor2u.net/economics/content/topics/housing/housing_government_policy.htm

Government policy and house price:-

http://www.mortgageguideuk.co.uk/blog/uk-housing-market/government-policies-and-house-
prices/

National Housing and Planning Advice Unit: www.communities.gov.uk/nhpau

Office for National Statistics: www.statistics.gov.uk

RICS Housing Market Survey: www.rics.org/Practiceareas/Property/Residential/Market/

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Valuation Office Agency property market reports: www.voa.gov.uk/publications/

Yahoo UK Finance: uk.finance.yahoo.com

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