The global economic recession has strongly created a lot of economics problems in world wide, such as consumer purchases fall, increase in unemployment and decline in house price . In the United Kingdom, housing prices also dropped, but during August the average cost for a home rose by 1.6%. This is, according to the article, mainly because of low interest rates and shortage of supply.

Low interest rate, the rate at which interest is paid by borrowers (debtors) for the use of money that they borrow from lenders (creditors), would create a outward shift in demand, which means the willingness and ability of buying commodity goods would increase. This happens is because low interest rate encourage buyer(consumer) to borrow more, which lead to an increase of spending, therefore this makes the equilibrium moved to a new position, resulting in a increase in price.

According the article, the problem of house price is also cased by the mortgage repayments. Low interest rates would lead to lower mortgage repayments, this means that homeowners, usually predicted to sell their homes during a recession, to refrain from doing so. This again create a inward shift in supply of home, the willingness and ability of providing a commodity decreases, as less owners decided to sell their house, which in result the position of the equilibrium would change and lead to a increase in price about 1.6%. As mentioned in the article, someone predicted that when there is a rise in interest rates in the future, the housing market may experience some falls in average price. This is because as interest rates increase, more people will save their money rather spending it. Hence the demand will shift inward, in addition, more homeowners are willing to sell their houses then because the higher mortgages.

In the article, the writer predicted that in the future, the house price may further falls. It is supported by the anticipation of higher interest rates. Also, due to the global economic recession the consumers confidence are low, if once ceteris paribus , when supply is equal to demand, they assume that the house price may not further increase, therefore some economists would argue that there is a high probability that the house price will fall in the future. Furthermore the increase of the added tax in January, back to the previous rate of 17.5% would result in using the income to compensate for the higher price. Hence, less consumers would be willing and able to buy new house and so the demand would drop and again the house price will then fall.

On the other hand, the article didn't really considered other factors that could possibly affect the demand and supply before the conclusion is made. For example in the Uk, for low earners, they can be support by tax credit, which allows certain taxpayers to subtract the amount of the credit from the total they owe the state. This would then increase demand for buying house, therefore the price of house may not necessarily fall due to the tax incentive. In addition, because there is speculation that the house price may rise, this would then lead to a excess demand as homeowners would like to wait to take the advantage of higher price when they are able to sell. Also, demand would likely to be enhance by the speculation as the consumers are more willing to buy when prices are considered low, when they know that in the further the price may most likely to be much higher. For example in China, lots of house buyers bought house when they think that the price is considered low, they bought it not because they wanted a house to live in, but buying it as an investment, because prices are predicted to increase. However, if too many house buyers are buy house as a business investment, then the house price will increase too high that it is impossible for low income families to have their own place to live. This is the problem that Hong Kong is facing. Hence, if this speculation really occur, then the prediction of the article about price falling may not be happen.

Overall the article mentions that the reason why Uk house price rose by 1.6% and then it hypothesise the problem, with some real satisfactory reasons why prices may fall in the future and how we could avoid it, but in real life we cant really be hundred precent sure that what is going to happen as thing may suddenly change. Although the justification in the article is accurate and is clear, however, it doesn't consider fully of a alternative reasons which may affect the price of the house in UK.