Unemployment
The causes of these dramatic price movements in such a short period are numerous as mentioned in the introduction but unemployment is certainly one of the most important.
At the start of the period the annual unemployment rate (April figures) stood 4.5% and remained relatively low until 2008 where it reached 5.4%. However as the financial crisis struck the unemployment rate climbed rapidly to peak at 14.8% in 2012. From then it has fallen to hit 9.8% for year ended April 2015 (CSO, n.d.).
As can be seen from the graph below the unemployment rates rise has mirrored the property index’s fall and vice versa to a very tight degree. I have divided the property indexes by 10 to make the graph easier to read and January 1st 2005 is 10.
So why could the unemployment rate affect the residential property prices to such a degree? Firstly traditionally most properties (more than 70%, though at present this figure is nearer 50%) are purchased with the aid of a mortgage and an unemployed person is not normally successful in getting …