UK Housing Market Analysis

1289 Words 6 Pages
1.0 Introduction
The UK housing market has experienced substantial growth in the last one year. In particular, the market has seen an increase in the number of transactions and new homes being constructed. In 2013, 1.07 million sales of residential property were recorded in the UK (Beckett 2014). Thus, the market is fundamental to the cash flows within the country as it influences both lending and investment. For instance, at the start of 2014, there was an increased demand for mortgage, which was estimated at ₤1,281 billion. Evidently, this is a lucrative option for investment by a lender or a real estate agent. However, as common with other asset investments, there are potential risks, such as external shocks (Stephens & Williams 2012). In
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Description of prices for different house types in Sheffield local authority
House Type Mean Price (₤) Median Price (₤) Mode Standard Deviation Min Max Count
Terraced 159204.29 142000 129950 53017.50 86000 310000 35
Flat 150445.00 141000 175000 41246.65 92500 240000 10
Semi-detached 273771.08 275000 345000 90857.21 90000 495000 39
Detached 367300.00 323900 - 191173.87 177500 950000 16
The detached houses have the highest mean price at ₤367,300, which varies within ₤191,173.87. The average house price for the semi-detached type is ₤273,771.08, with a variation of ₤90,857.21. On average, the terraced house type costs ₤159,204.29, and this varies by ₤53,017.50. Flat houses are the least costly on average at ₤150,445, which varies by ₤41,246.65.
2.3 Confidence Intervals
It is possible to approximate with confidence the range of prices for the different house types. The prices in table 2 indicate the range of house prices for each house type with 95% confidence.
Table 2. Prices of the different house types and their 95% range 95% CI
House Type Mean Standard Error Lower Upper
Terraced 159204.29 8961.59 141639.88 176768.69
Flat 150445.00 13043.33 124880.53 176009.47
Semi-detached 273771.08 14548.80 245255.96 302286.20
Detached 367300.00 47793.47 273626.53
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It is also expected with 99% certainty that flats will cost between ₤116,847.60 and ₤184,042.40. Additionally, the price of semi-detached houses is expected to be between ₤236,295.86 and ₤311,246.29 with 99% certainty. Further, the price of detached houses is expected to be between ₤244,192.19 and ₤490,407.81 with 99% confidence.
2.4 Hypothesis Tests
It is important to validate whether the observed average prices of the different house types differ with Sheffield’s local authority average house prices. Thus, the average price of the houses is compared with the authority’s average prices. The summarized results of the hypothesis tests are shown in table 4.
Table 4. Hypotheses test results for average house price, by type
House Type Count Sample Mean Standard Error Population Mean t statistic Critical t
Terraced 35 159204.29 8961.59 124259 3.90 2.03
Flat 10 150445.00 13043.33 104362 3.53 2.26
Semi-detached 39 273771.08 14548.80 146943 8.72 2.02
Detached 16 367300.00 47793.47 249046 2.47 2.13
Notes: Values of critical t are based on α = 5%, with n-1 degrees of

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