Click on the information button and read the information then draw on the graph how the rise in house prices in the UK has affected housing supply in London.
UK house prices hit all-time high

House prices in England and Wales rose by 6.8% in August 2013, compared with price levels a year ago, according to the Land Registry’s latest residential property price report published today. The average house in the UK now sells for an average of £242,415, up from £226,895 a year ago.

Sales volumes in London, reflecting the supply of housing, also rose from 20,782 to 29,241 over the year.

The Chancellor plans to relax planning controls on ‘green belt’ land

1) The Chancellor has announced that restrictions on where new houses can be built have been relaxed – it is now easier to build new houses on ‘green belt’ land (land where currently no other properties exist).

Suppose that new houses are built at a rate of 20,000 per year in the London area. Draw a new supply curve to reflect this effect.

Housing sales restricted by tight credit market

Although generally thought of as a demand factor, the shortage of available loans is stopping house-buyers from climbing up the property ladder, because many are unable to finance the extra borrowing that is required for a larger house. As a result the supply of smaller properties coming onto the market has fallen to a trickle.

1) Adapt your original supply curve to show the likely effect of this phenomenon on housing supply.