Economical Conditions That May Impact Real Estate Industry

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 Economical Conditions That May Impact Real Estate Industry

Since the industry will be situated in the United Kingdome, there are several economic

conditions that would impact it. The COVID-19 pandemic had hit the country to a level that the

GDP was low. During the time the prices of the real estate declined drastically (Blakeley, 2021).

However, the united kindom is on the verge of recovering to its economic condition before the

pandemic (Partington, 2022). this means that in the next years the growth rate would be in an

increasing trajectory. Increase in GDP means that the prices of the Real estate would also be

increasing. In recent months, home prices have increased at historic levels, reaching their highest

point of growth (19.3 percent) in the month of July 2021 (Dallasfed, n.d.). When compared to

what took place prior to the pandemic—from the beginning of 2013 to the beginning of 2020—

when house prices rose at a moderate annual rate of approximately 5 percent and exceeded the

rate at which rents increased, these double-digit increases represent a stark departure from those

trends (Dallasfed, n.d.). this suggest that the business still have several opportunities that any

new organization would exploit.

Another condition that can be a threat to the industry is inflation rates in the U.K. The

average inflation forecast for a household in 2021 is 3.8%, according to surveys of inflation

predictions for 2021 (CEPR, n.d.). This indicates an increase in inflation expectations. The

expectations that are suggested by inflation-protected gilts forecast that inflation will remain

above its goal for a significant portion of the following decade. The instantaneous inferred

inflation forward curve in the UK shows an estimate for inflation over the next 10 years of 3.5%.

According to data that was released by the Office for National Statistics (ONS), the annual rate

of growth in average home prices was 15.5% from July 2021 to july 2022. The annual inflation

rate has more than doubled from the 7.8% reported in the year leading up to June, marking the
sharpest annual jump since May of 2003 (Howard, 2022). According to the most recent

information from the ONS, the average price of a property in the UK was £292,000 in July. This

figure is £6,000 more than in June and a remarkable £39,000 higher than in July of the previous

year (Howard, 2022). this shows that as it is expected that the iflation rates will be in n

increasing trend then the prices.

Another economic condition is the trend of housing in the UK. The UK have been

experiencing shortage in housing and the government plans to build over 30000 houses yearly to

meet the demand (AVRillo, 2022). this shows that the demand for housing is a continuous rise.

though the government is trying to meet the demand the rise shows that the real estate sector is

still open for investors as the current investors cannot meet the demand. the only challenge that

emerges is that many industries have seen the opportunity and have started competing for it

(Mordorintelligence, n.d.). this would mean there is a stiff competition in the sector which may

pose a threat to any industry in the sector. These factors would determine the purchase ability

and prices of real estate. they can therefore pose threats or opportunity to any industry.
 References

AVRillo. (2022, January 10). UK real estate market trends for 2022. AVRillo.

https://avrillo.co.uk/uk-real-estate-market-trends/?

utm_source=rss&utm_medium=rss&utm_campaign=uk-real-estate-market-trends

Blakeley, G. (2021). Financialization, real estate and COVID-19 in the UK. Community

Development Journal, 56(1), 79–99. https://doi.org/10.1093/cdj/bsaa056

CEPR. (n.d.). Post-Covid inflation risks for the UK. CEPR. Retrieved September 23, 2022, from

https://cepr.org/voxeu/columns/post-covid-inflation-risks-uk

Dallasfed. (n.d.). Why house prices surged as the COVID-19 pandemic took hold. Dallasfed.org.

Retrieved September 23, 2022, from

https://www.dallasfed.org/research/economics/2021/1228.aspx

Howard, L. (2022, September 21). House prices – latest news. Forbes.

https://www.forbes.com/uk/advisor/personal-finance/2022/09/21/house-prices-updates/

Mordorintelligence. (n.d.). UK Real Estate Services Market size, share, trends (2022 - 27).

Mordorintelligence.com. Retrieved September 23, 2022, from

https://www.mordorintelligence.com/industry-reports/uk-real-estate-services-market---

growth-trends-and-forecast-2020---2025

Partington, R. (2022, January 2). What does 2022 hold for the UK economy and its

households? The Guardian. https://amp.theguardian.com/business/2022/jan/02/what-

does-2022-hold-for-the-uk-economy-and-its-households