Thursday, May 3, 2007

How Should the Government Respond to a House Price Crash?

There is an interesting essay question from an old AQA AS paper.

Should the Government leave house prices to market forces, or actively intervene to prevent a house price crash? Justify your answer. (15 marks AQA Jan - 2006)

View: Suggestions on how to answer this Essay on the Housing Market

Basically, a house price crash would have serious economic consequences for the UK economy. (Effects of house prices on UK economy) Therefore it is best for the government to prevent a house price crash, if possible. However, if house prices are fundamentally overvalued, as some suggest, there is little the government can do to prevent them falling.

Also, not everyone will be displeased to see house prices fall. Especially, those first time buyers who have been priced out of the market.

The rise in House prices has led to a dramatic shift in wealth from the younger generation to the older generation. There is also little political will to do anything about it.

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