Question

Table 1: Stylised estimates of the individual real impact on house prices by determinant, all else held equal. (Source: Ministry of Housing, Communities & Local Government, 2018) Factor relationship Description Period Real impact on house prices over 25 years (1991 prices) 1991-2016 Total England population growth 32% +£17,000 Cumulative growth in England population (1% increase in households: 2% increase in house prices) 1991-2016 +£11,000 Total England population Cumulative growth from net international increase in migration the non-UK- born (1% increase in households: population 2% increase in house prices) Incomes 1991-2016 150% +£80,000 (1% increase in real incomes: 2% increase in house prices) Real household disposable income 1991-2016 -40% -£21,000 Housing supply (housing stock) Cumulative net additional dwellings (1% increase in housing supply: 2% decrease in house prices) 2.1 Table 1 identifies four determinants that increase either supply of housing or demand for housing. Answer the following two multiple-choice questions in the table that follows.

1. Determinants of demand include ______.

2. Determinants of supply include _______.

a. Population size

b. Real income

c. Housing stock

d. a and b

e. b and c

Answer 1

Determinants of demand are "Both A and B"

Change in Population size and Real Income will determine the demand for housing. Here 1 % increase in household population leads to 2% increase in House prices and same with income level. Higher the income will result in increase in consumption

Determinants of supply include "Housing stock"

1 % increase in Housing supply results in 2% fall in House prices. Here supply of housing determines its price.