Wednesday, December 11, 2019

Rising Costs in Australian Housing Free-Samples for Students

Question: 1.Why house prices are so high in these two capital cities and provide evidence to support your answer. 2.Suggest ways the house prices can be contained (reduced) and provide evidence to support your answer 3.If you are a young Professional with a very young family, provide reasons how one can afford to buy into such an Expensive Housing Market in Sydney or Melbourne at such current high price and provide evidence to support your answer. Answers: Rising Costs in Australian Housing Introduction The cities of Melbourne and Sydney are experiencing soaring house prices that create anxiety in the market. Far much, the case provides worry to the housing sector since the prices are too high compared to the wage rates thereby limiting the ability of individuals owning houses. There have been claims that the rising costs in housing result from the inadequate housing facilities that prompt a high demand for the houses. According to Wood, Smith, Cigdem, and Ong, (2017), immigrants, upon realizing a market opportunity have infiltrated the industry by purchasing the houses and later making a resale at relatively high prices. The paper looks into the causes of the rising prices, finds solutions towards cushioning the citizens from the situation, and the avenues through which individuals can secure cheaper means towards owning a house in the volatile market. 1.Causes of High Market Prices The high inflation caused by the economic challenges that hit the world led to an increase in the interest rates charged by banks when securing credit facilities. The inflation rate acted negatively towards the economy by raising the rates of mortgage loan which translated into high costs of owning a house (Haber 2015). Changes in housing prices depend on the status of the economy and the availability of finance. Therefore, the limited availability of funds owing to high rates led to high cost of construction which transformed into a high cost of obtaining houses whether through credit finance or one-time purchase from savings. It is important to note that considerable number of individuals purchase properties through mortgage, which serves as another reason to the high prices. The rise in the mortgage rates has a negative effect on the house prices in the two cities, more so in the case of Sydney (Crabtree 2016). The high rate of mortgage results in an increase in house prices with the channel being used by a considerable number of people to gain ownership of houses (Easthope 2014). Besides, the low wages that fail to match the increasing prices prompts individuals to seek the credit alternatives leading to adoption of mortgage loans. On the other hand, the idea of foreigners coming into Australia from countries with easy access to credit explains the rising prices in real estate ownership (DeFusco and Paciorek 2017). Individuals with huge investment capabilities opt for the investment, where they enter the market and purchase apartments. In so doing, the investors rent out the facilities in speculation for a rise in prices before selling them at competitive prices costs. Such kind of infiltration into the market leads to a growing demand for houses which subsequently pushes the costs of housing higher. As can be seen, the concept of demand and supply forces comes in to control the prices of commodities in the market. The situation brought in by a high number of investors in the market coupled by the local purchasers and the rising costs lead to a high demand for the houses which translates into a heavy price for the commodity (Hilber and Turner 2014). While the cost of construction remains high, the effects spill over to the price of selling houses that amount to the escalating costs. As a result, it is evident that the micro and macroeconomic forces have a hand in the ever high cost of house and apartment ownership in the cities in Australia. 2.Containing High Housing Prices In reducing the menace, there are several options that the government can utilize to ease the pressure in the sector. The government can reduce the issue by supporting affordable housing in the towns and offering incentives to the low-income earners to own homes. It is important to promote the interests of the locals by giving them an upper hand when it comes to purchasing of properties. There is a need to limit the number of properties in the sector that foreigners can own to reduce the frustration caused by the high demand that leads to a rise in prices (Hilber and Turner 2014). Moreover, the government should increase the rate for foreign investors in the sector to discourage the high infiltration into the housing sector that could potentially lead to doubling of the house prices. For instance, foreign students purchasing the houses must be required to sell once leaving to their home countries to allow the locals have access to the homes for posterity reasons. Correspondingly, it is prudent for the government to support the growing workforce by introducing an incentive in the sector. The first time house owners should be given a waiver or a lower interest rate as opposed to having a uniform rate for all individuals. According to Kim and e Mauborgne (2014), housing should be treated as a fundamental right and in this case allowing first-time owners easy access to finance while charging the second and subsequent owners the standard rate. Notably, it would be good for the government to increase the rate for foreign home owners to give the locals an upper hand since they contribute immensely to the taxes used in paying for infrastructures and government running. Alternatively, the government needs to check the issue of wages and provide a policy towards increasing the pay level of individuals to match the demands and costs of living. Setting the level at optimum levels with the housing prices would enhance the ability of the locals in the cities to own houses at competitive prices (Mian and Sufi 2015). At the same time, the government can opt for the solution of reducing taxes on the environmentally friendly construction material to lessen the cost of construction while remaining responsible to the environment. By so doing, it would guarantee a double benefit for the people and the environment. Eventually, the government can encourage regional development and improve the public transport sector to allow individuals work in the city but live elsewhere where there exists little pressure on the housing sector. While doing so, caution must be taken by the government to allow affordable housing structures and institutional ownership of properties to reduce the likelihood of individuals using the sector for business by anticipating for high prices. Investors anticipation for high prices raises the case of escalating costs of housing. In so doing, the government would protect the locals who desire to have affordable housing. 3.Affording a Cheaper Housing in the High Price Mortgage Environment The high prices in houses pose a challenge to young professionals who might not afford to secure and successfully remit payments to the mortgage financiers (Chan, Haughwout and Tracy 2015). In this respect, seeking other options of finance and purchase becomes viable for success. It is important to do a lot of savings while working to secure sufficient deposit for a house. In easing the pressure caused by the high costs of property, one can opt for a shared ownership by getting into a social circle that desires to own a house (Bachmann, Berg, and Sims 2015). In such a situation, individuals can provide a deposit to gather the required amount for owning a property. The advantage of the option guarantees individuals with the right to pay a little deposit and pay lower rates of the mortgage as the risk is shared between people under the ownership. Alternatively, a professional can opt for assistance through a contribution from friends and family to raise the initial deposit and part payment for the mortgage as one continues to save money towards meeting the other part of the bargain. The option leaves one with little frustrations rather than trying to raise the finance in solitude. Parental assistance is essential to home ownership, where an individual upon working for a considerable time can manage to pay the rest of the money thus ending up owning a house (Arnold, Drger and Fritsche 2014). Lastly, the third option lies in saving and asking for support from friends and family to secure sufficient funds for an auction buy. Auctions offer considerable prices for individuals who upon winning a bid have access to home ownership at a considerable price (Campbell and Cocco 2015). The option is the cheapest as it depends on the balance one had to pay to determine the housing cost of property under auction. In this respect, one should get in a relationship with an auction firm to inform or send the latest updates on auction offers and wait for a probable offer to utilize in a purchase. Conclusion The rising costs in the real estate sector present a worrying trend to home owners. The effects of inflation giving rise to increased interest rates make home ownership a difficult affair. In easing the pressure, the government should work towards resolving the issues through creation of a monetary policy towards economic growth. Going for cheaper options serve as a method towards securing a cheaper home coupled by exploring the purchase of auctioned property. Conclusively, the volatile market can be overcome by economic solutions based on the adjustment in monetary policies which leads to ease of accessing properties around the cities of Australia. Reference List Arnold, E., Drger, L. and Fritsche, U., 2014.Evaluating the Link between Consumers' Savings Portfolio Decisions, their Inflation Expectations and Economic News(No. 2/2014). DEP (Socioeconomics) Discussion Papers, Macroeconomics and Finance Series. Bachmann, R., Berg, T.O. and Sims, E.R., 2015. Inflation expectations and readiness to spend: cross-sectional evidence.American Economic Journal: Economic Policy,7(1), pp.1-35. Campbell, J.Y. and Cocco, J.F., 2015. A model of mortgage default.The Journal of Finance,70(4), pp.1495-1554. Chan, S., Haughwout, A. and Tracy, J.S., 2015. How mortgage finance affects the urban landscape. Crabtree, L., 2016. 10 Unbounding home ownership in Australia.Housing and Home Unbound: Intersections in Economics, Environment and Politics in Australia, p.173. DeFusco, A.A. and Paciorek, A., 2017. The interest rate elasticity of mortgage demand: Evidence from bunching at the conforming loan limit.American Economic Journal: Economic Policy,9(1), pp.210-240. Easthope, H., 2014. Making a rental property home.Housing Studies,29(5), pp.579-596. Haber, H., 2015. Regulation as social policy: Home evictions and repossessions in the UK and Sweden.Public Administration,93(3), pp.806-821. Hilber, C.A. and Turner, T.M., 2014. The mortgage interest deduction and its impact on homeownership decisions.Review of Economics and Statistics,96(4), pp.618-637. Kim, W.C. and e Mauborgne, R., 2014.Blue ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant. Harvard business review Press. Mian, A. and Sufi, A., 2015.House of debt: How they (and you) caused the Great Recession, and how we can prevent it from happening again. University of Chicago Press. Wood, G.A., Smith, S.J., Cigdem, M. and Ong, R., 2017. Life on the edge: a perspective on precarious home ownership in Australia and the UK.International Journal of Housing Policy,17(2), pp.201-226.

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