In the News Teaching Activity: UK House Prices Are Falling More Rapidly (Sept 2023)
House prices have fallen by 5.3% in the year to August according to Nationwide. Have a go at this free teaching activity, which includes a downloadable worksheet and suggested answers.
House prices in the UK are affected by changes in demand and supply for housing. A key reason for the fall in house prices is the impact higher interest rates have on demand. The Bank of England has increased the bank base rate from 0.1% to 5.25% since the end of 2021. Mortgage interest rates have followed a similar upward path.
According to this BBC article, there has been a 25% fall in the number of first-time buyers. The fall in house prices has occurred despite much-discussed shortages in housing in the UK. According to the government’s own statistics, 239,380 new properties were built in 2022-23, an increase of just 3% on the previous year.
Read the article and then answer the following questions.
- How do higher interest rates affect the demand for houses?
- Draw on a demand and supply diagram to show the effects on the housing market of an increase in interest rates, ceteris paribus.
- What other factors influence the demand for houses?
- What factors influence the supply of houses?