To what extent has the credit crunch contributed towards a downturn in Essay - 1

To what extent has the credit crunch contributed towards a downturn in UK house prices - Essay Example A trial is being made to relate the trends in the housing markets and the financial crunch to the theories of economics. The credit crunch and the national and international economic developments have had substantial impact on the country’s real estate market. Before analysing the present situation of the market, it would be ideal to have an overview of the historic developments in the housing market of the United Kingdom. After the downfall of the housing industry in early 1990, there had been a steady growth in the UK housing market. From the stage of disaster, the industry had dramatic growth resulting in the average house price to touch  £163,000 in the year 2005. The quantum of the growth is reflected by the fact that this price was the double of the average house price in the dawn of the millennium. (Cameron G, 2005,). Interestingly the trend was similar in the international scenario as well. The downfall of the US economy and the recession which began in early 2007, catalysed a chain reaction in the international economy as well. This resulted in serious credit crunch in most of the leading economies. The UK economy was no exception. There were serious negative responses in the economy which led to acute credit crunch. The finance flow was seriously affected. Real estate was one of the first industries to be affected by the credit crunch and the allied economic developments. The post recessive period observed critical economic outcomes in the housing industry of United Kingdom. In comparison with the previous year, the house prices were 7.4 percent lower in October 2008. (DCLG, 2008). The average house price in UK in October 2008 was  £203,539. At the same time the house prices paid by the first time buyers were almost ten percent lower than that in the previous year (DCLG, 2008). Meanwhile while