Housing is a crucially important industry in the economy. Directly and indirectly it employs huge numbers of people and accounts for a sizeable percentage of the value of GDP. In microeconomics we are asked to apply supply and demand concepts in understanding price differentials and price changes.

The UK housing industry is widely regarded as a cause of several market failures and there is structural shortage of affordable properties in both the owner-occupied and rented sector. Can appropriate government interventions improve the outcome for consumers and producers or might they lead to instances of government failure. This is a good market to apply your AS micro theory!

Affordability of housing for first time buyers

Home ownership has become increasingly difficult to access, particularly for first-time buyers, as house price growth has outstripped growth in wages. Median house prices in England in 2018 are now 7.7 times higher than median earnings. In London, the ratio can be considerably higher: in Chelsea & Fulham, it is 24.8.