Is housing part of macroeconomics? You’ll get the opportunity whilst you’re studying here to think much more about housing policy, should you want to; we have experts in the department in Geoff Meen and Andi Nygaard, but we won’t spend any time on housing during Intro Macro next term. Nonetheless, as this Comment piece in the Guardian today makes clear, it matters in all sorts of ways across different sections of society and indeed the economy – and as such should be thought of as having a macroeconomic effect.
Buying a house is the most expensive thing most of us will ever buy, particularly here in the south of England where a four bedroom house can now cost easily above half a million pounds. Many times average income levels, and as such a huge loan must be taken out by home buyers, increasing our indebtedness at a time when debt levels are increasingly becoming a cause for concern. repayments are spread over many years – 25 or 30 years, commonly. The repayments made generally rely on the rate of interest charged, which is often a variable rate meaning it fluctuates with the rate of interest set by the Bank of England each month.
In addition, house prices across the country reflect economy-wide policies and actions both on the supply side, and the demand side. The Comment piece refers to a number of policies on the demand side primarily (right to buy, and various help-to-buy schemes that reduce the size of the deposit needed to get a mortgage), but there is also the supply side: since the late 1970s the number of houses being built to satisfy our demand as the population increases, as been very low by historical standards. Why is this? Why can’t governments simply build houses?
These are all sorts of questions you’ll be able to start putting together answers to as you study economics with us…