Housing demand and supply
There are many factors that affect the demand of housing in different areas of the world. Some of the factors include the affordability, interest rates, confidence, population pressure, and mortgage availability. Mortgage availability depends on the willingness of the banks to offer mortgages and at desirable rates. The willingness of the individual to borrow bank loans also matches with their ability to pay back the loans at the required time and with the correct interest rates. If banks lend mortgages at desirable income multiples the result is high demand for houses (Lawrence, 2003, p. 71).
Another factor that affects housing demand is the population pressure. The increase in population calls for more needs to get more housing facilities. Changes on demographic patterns have lead to a higher demand in housing. It is worth noting that there is an increase on the number of persons that live singly thus a rise in demand of house.
The housing demand is also affected by the interest rates offered by banks. For example if the interest rates are high there will be low demand for housing. A collapse in housing demand was noticed in the year 1992, in the United Kingdom due to the increased interest rates that went as high as 15.
While the lowered interest rates encouraged high demand for houses in the late 1990s into the 2000s. however, demand may remain low even though the interest rates are lowered and that would mean that the economic growth would be low or the there are other factors that are forcing the demand to be low (Lawrence, 2003, p. 72).
The ability of consumers to predict the future enable them gain confidence on their investment plans. If the economy seems to grow consisted the consumers will find it easy to get more housing facilities due to the in-built confidence on the future expectations of higher prices in future.
The affordability of the housing facilities is also a key factor in the increase of housing demand. Low housing cost leads to high housing demand. With a high growing economy there may be a rise in demand of houses because people have a lot to spend are there fore willing to get better housing facility.
The supply of housing facilities on the other hand depend on factors like public land policies, profits associated with the building of new houses, and the number of houses under construction. The profit associated with the construction of new houses is determined by the housing prices as well as the demand. For example if there are good prices that are likely to yield better prices, the suppliers are likely to invest more on building new houses (Lawrence, 2003, p. 76). On then other hand if the demand is low housing supply will tend to retaliate or decline because investors are cautious of investing in unproductive businesses.
Restrictions on housing supply may be associated with the government policies that control the number of houses to be constructed over a certain period of time. Other policies allow construction of new house depending on the land availability and the required use of the available land. Majority of the governments all over the world have set up land policies that govern the building patterns and land provision for building.
The sustainability of housing supply is depended government policy as regards housing. For the government has the mandate towards the provision of building land (Lawrence, 2003, p. 82). The resettling of populations in rapidly growing population paves way towards the provision of more land hence the housing supply is increased.
The government projects on the future settlement plans for their population housing depending on the demographic studies that the country. The government planning on house supply is based on the level of demand for the house. The number of houses under construction limits the chances of starting up new building depending on whether the government has allocated funds to support buildings (Lawrence, 2003, p. 97).
Government taxation may be use to reduce the cost of land ownership as well as building costs. The government may also encourage investment by institutions through taxation policies thus encouraging housing supply. In addition to that homeowners may be favored by government tax regimes thus it may encourage more people to opt for home ownership rather than renting (Lawrence, P. 111). However the stamp duty may some times be a source of constrains related to housing supply.
The government planning systems may encourage or discourage supply of housing facilities. Housing supply is in most case limited by the planning systems because they control the nature of settlement patterns to be exhibited within a given area as well as the determination of building space on the land. In this case the cost of supplying housing may be a major setback towards the supply of houses.
Sometimes the government may issues a housing policy that dictates that there should be no new buildings established within a certain residential zone. This decision may be as result of a proper analysis of the land quality may be the land soil strength may dictate the issue of such a decree (Lawrence, 2003, p. 117). However, in such situations, the government may order for the renovation of the existing building. The overall result is a limit housing supply within that region.
The rate of development limits the quality and type of houses to be supplied. This is due to lack of strong financial institution, the high inflation rates, undetermined legal system as well as cultural barriers that may limit the number and nature of houses being constructed. With high inflation rates there are low quality houses while the existence of cultural conflict or civil wars may lead to a low housing supply.
Political instability is a key player in the prediction of future investment in housing supply since investors fear to build house during political crises because their houses may lack tenants or if the worst comes the houses may at times be burnt or destroyed by the conflicting communities (Lawrence, 2003, p. 124). Therefore, if a government wants to encourage the housing supply it may need to create conducive environment for such investment by ensuring peace and political stability within the nation.
In conclusion, housing supply is depended on the demand as well as government regulatory policies. The demand is largely depended on the population growth rate and the demographical factors associated with the growth rate. The demand also depends on the rate of growth rate of the economy of the nation or the region. Also, the government may seek to control the supply or to encourage housing supply depending on the policies set towards land ownership as well as housing policies.