Migration and the UK housing market

In our revision session for students tonight ahead of their AS papers tomorrow we looked at some current issues relating to the housing sector. One of which is the economic impact of high levels of net inward migration on housing demand and supply. Here are the revision notes I wrote up after the lecture.

Immigration and the UK housing sector

Strong net inward migration in the UK this decade
Most notably from new member states of the EU e.g. Poland, Baltic states, other eastern European countries e.g. Czech Republic
Has led to sharp rise in total UK population

Impacts on housing

Simple point: rising demand for property – people need somewhere to live

But

1. Affordability issues – many migrants are on low wages and cannot afford to buy
2. Leads to rise in demand for rented property
3. This had led to an increase in average rents in the private sector especially in towns and cities where inward migration has been significant
4. Also a rise in demand for social housing / housing provided by housing associations
5. Inelastic housing supply – difficult to provide enough new housing to meet rising demand

You should be able to use supply and demand diagrams to show what is happening here

Evaluation points

1. Increased pressure on scarce housing resources – puts demands on local authorities
2. Good for the private rented sector inc buy-to-let investors who can charge higher rents
3. Effects have been unevenly distributed – not all regions have seen same migration levels
4. Problems for UK people who cannot afford to buy and who face higher rents?
5. Many of the migrants are only here for a short time – indeed evidence that many are already returning to their country of origin
6. Effects on demand for housing depends in part on whether migrants bring their families with them e.g. will affect the pattern of demand for different properties
7. Possible market failures including information failures if migrants do not understand how the housing market works in the Uk – risks of exploitation

Immigration and housing supply

Many migrant workers have come to work in construction and related industries
This helps to reduce some of the skilled labour shortages in construction – keeping wages and costs lower than they might otherwise have been
Migrants may also have led to a rise in the economy’s productive potential – keeping inflation down and allowing the economy to grow – this benefits nearly everyone

You might have to make a judgement about whether the high level of immigration has been good or bad for the UK housing market / economy use whatever evidence is provided in the question paper.