Author: John Sloman

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House prices: on the rise again?

According to the Nationwide building society, house prices rose in March for the first time in 16 months. Does this mean that the decline in UK house prices is over? Or is this just a ‘blip’ in a continuing downward movement? The following articles look at the causal factors influencing house prices.
UK house prices rise first time in 16 months Times Online (2/4/09)
House prices show slight increase in March Guardian (2/4/09)
Surprise bounce to March house prices Nationwide press release (2/4/09)

Questions

  1. Identify the factors on the demand and supply side that have caused the fall in house prices since mid 2007.
  2. What have been the main reasons why house prices rose in March 2009?.
  3. How likely is it that house prices will now continue to rise?
  4. What role does speculation play in the movement of house prices? What role is speculation likely to play in the next few months?
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Britain’s widening trade gap

The November 2008 trade statistics have just been released and they show that the UK had the largest nominal trade deficit on record at £8.3 billion (up from 7.6 billion in October). This represents nearly 7 per cent of GDP, the highest since 1974.

Trade gap widens despite pound’s slump Independent (14/1/09)
UK trade deficit hits a record as weak pound fails to help Telegraph (13/1/09)
Britain’s trade deficit widens to new record Guardian (13/1/09)
UK Trade, November 2008 National Statistics (13/1/09)

Questions

  1. Why has the UK’s trade gap widened?
  2. How can the concepts of income and price elasticity of demand be used in analysing the causes of the widening deficit?
  3. Explain how these elasticity values are likely to differ in the short and long run.
  4. Explain the factors that will determine whether the trade gap will widen or narrow over the coming months.