Business Economics Housing Finance in Australia †Free Samples

Question: Discuss about thee Business Economics Housing Finance in Australia. Answer: Introduction Significantly, Sydney and Melbourne have experienced among the highest housing prices in Australia and the world .Notably, some of Australia s population considers affording decent housing in Melbourne and Australia impossible due to income disparities. The housing price is way above most Australian pay grade thereby the need for government intervention to lower the housing prices in Sydney and Melbourne for affordability purposes for most of its population. Noteworthy, the high prices are attributed to shortage in supply of decent and affordable housing facilities (Collyer, 2016) Further, some economists attribute the high housing prices to population growth triggered by the influx of immigrants into the Sydney and Melbourne. Causes of the High Housing Prices Notably, interest rate on financial credit facilities affects the financial ability of potential new owners. Low income earners are likely to apply with loans with low interest rates due to their ability to repay thereby low interest rates on credit facilities will attract many borrowers thus the demand for decent housing facilities (Holt, 2009)Typically ,high interest rates imply high repayment terms thereby attracting few borrowers(Parliamentary business Committee ,n.d). In turn, there will be less demand for housing facilities in Sydney and Melbourne thus causing significant price reduction of housing facilities in the two areas(Robb,2017 .Usually, access to credit financial facilities has enabled low and middle income earners afford decent dwellings. Predominantly, global and national economic conditions affect the prices of goods and services. Government intervention in financial regulation is necessary and inevitable to provide financial stability.However,easy accessibility to financial credit packages has enabled most households in Australia achieve decent housing facilities and better economic livelihoods Consequently, this has increased the demand for decent housing facilities in Sydney and Melbourne due to their urbanized nature ,migration is inevitable .Following the increase in demand pressure has been put on the supply side of housing facilities in Melbourne and Sydney thereby influencing high prices of dwelling places.Inevitably,theres need to meet the demand. In addition, government intervention through regulation of land use through its policies and urban planning requirement has greatly affected the construction of urban housing facilities. Primarily ,the government of Australia prohibits the use of new land for construction in urban areas of its states which in turn limits the land available for construction of housing facilities in Sydney and Melbourne(Collyer,2016)Further ,the formulation of government policies against greenfield developments has denied housing providers the opportunity to meet the growing housing demand thus encouraging high prices of houses in Sydney and Australia due to the low supply despite the growing demand. Subsequently, foreign and domestic competition between housing providers has contributed to the high pricing of houses in Sydney and Melbourne(Exfin, n.d.) .Significantly ,foreign housing providers have relocated their business to Sydney and Melbourne thereby attracting their foreign folk to these cities and charging expensive housing prices .Further ,foreign investors have threatened business for local housing providers thus the influx of competitive markets(Verrender,2015)Also ,the presence of foreign dwellers in Sydney and Melbourne has increased the demand for housing facilities between locals and foreigners thereby contributing to the high housing prices in Sydney and Melbourne. Predominantly, population growth influences the supply and demand for any commodity or service and the housing sector is no exception .Inevitably ,the growth of households and the migration of Australians and foreigners into Sydney and Melbourne has contributed to it high pricing due to the increase in demand(Koziol,2017) .Population growth has put in place pressure on the already existing demand for housing and most housing providers are unable to supply due to various reasons thus encouraging the high housing prices on the existing short supply of dwelling facilities .Usually ,people are drawn to urban areas because of the job opportunities, better infrastructure and the hope for better economic livelihoods. Further, the price increase in Sydney and Melbourne is attributed to the household size changes. Noteworthy, the dwelling facilities in these areas are averagely big and some housing developers have adopted a luxurious approach which is naturally expensive thereby propelling the high housing prices in Sydney and Melbourne. Subsequently, the housing contractors are incurring substantially high operating and construction costs which in turn is transferred to housing consumers in a bid of making a profit and meeting the supply of housing facilities in Sydney and Melbourne .Also ,the focus on big households has created pressure on the existing small housing units thus making their prices high. Regulation Subsequently, the high house pricing in Sydney and Melbourne makes necessary the intervention of government thus the involvement of the government through incorporated measures to mitigate the undesirable consequences of the expensive prices on the housing market. Negatively, the high house price has caused poverty and indecent housing for most of the population in Sydney and Melbourne. Further, high interest rates on home ownership in these two areas is also a problem for some citizens living in Sydney and Melbourne thus the dire need for government intervention. Notably, the Australian government has availed financial incentives and loans to housing providers through grants and subsidies in an effort to boost the supply of houses in Sydney and Melbourne towards housing investments. Subsequently, the supply of houses will increase due to many investors into the sector who are attracted by the grant and subsidies on housing .Equally, the grants and subsidies has encourage local and foreign investment into the Australian housing service providers thereby meeting the growing need for housing at affordable prices for both local and foreign dwellers in Sydney and Melbourne. Through the grants and subsidies, jobs have been created for locals in the construction of housing facilities thereby boosting livelihoods. Further, investment by the government into public housing facilities is likely to reduce the rate of homelessness in most parts of Australian states .The availability of public housing will reduce the demand for houses in Sydney and Melbourne in turn reducing the high housing prices Primarily ,public housing facilities are likely to be cheaper thus affordable for most Australians thereby reducing the housing shortage in the process. Notably ,these public housing should be made available in urban areas to due to the ever growing demand pressure attributed to migration trends into the urban areas(Dalzell,2016)Usually ,public housing is a government based initiative to accord basic housing facilities to its citizens. In addition, there are alternative ways to home ownership available in Australia .For instance, credit financial facilities such as mortgages and loans have been made accessible to most of the Australian Population (Australian Bureau of statistics,n.d.)thereby enabling low and middle income earners to own decent housing in Sydney and Melbourne.Further,housing schemes have been implemented to enable easy access to decent housing facilities. Moreover, shared home ownership has also helped part of the Australian population home owners in highly priced places like Sydney and Melbourne(Dalzell,2016)The Australian housing department has made available shared home ownership arrangement.Primarily,new owners open start loan account with the bank and are offered part ownership of with the government staking 30% ownership. However, theres an option of buying out the government and acquiring full home ownership. Notably, this shared homeownership is advantageous because it allows low and middle income earners to afford decent housing facilities despite their current financial instability thus enabling a young professional afford housing facilities in highly priced areas like Sydney and Melbourne .The option of buying out the government of Australia has favorable terms to potential home owners since they are able to afford housing and buy ought the government at their own financial convenience. Significantly, this shared home ownership arrangements has reduced the number of homeless Australians in most urban areas. Also, the implementation of grants to first home owners has greatly afford young professionals the ability of young professionals to afford decent housing facilities in Sydney and Melbourne(Office of State Revenue,2017)Applications by first home owners for the grants are submitted to the housing Department of the Australian government. Successful first home grant applications have made the dream of home ownership more realizable for most young professionals (Lusted, 2017). Through this grants, first time ownership has been made easy thereby reducing homelessness and motivating the Australian professionals to afford decent houses despite their current financial status. In addition, the availability of mortgage loans to the Australian population has been made simple and affordable thus making it easy for a young professional to be a home owner in the highly priced Sydney and Melbourne areas. Notably, mortgages have provided decent housing for most of the population despite their current financial status due to the favorable payment terms. Predominantly, mortgage is a common way of home ownership for most people in developed economies. Mortgages have enabled low and middle income earners to be home owners despite their age and current financial status. Housing mortgages facilities are available through financial institutions and housing schemes. Conclusion Notably, Australia has among the highest housing prices in the world, in Melbourne and Sydney respectively .Primarily ,the high housing prices are attributed to easy accessibility of financial credit facilities ,low interest rates on financial credit facilities ,population increase and government regulation of land usage in urban areas among other factors .The growing demand for housing facilities in Australia has encountered supply chain challenges such as government regulation ,scarcity of land and high construction costs .Inevitably ,the high housing prices has made government intervention necessary through government regulation of financial sector, provision of grants and subsidies to boost housing investment and investing into public housing facilities to afford decent housing to low and middle income earners with decent and affordable housing. Eventually, high housing prices are likely to reduce due to government policies and measures. References Australian Bureau of Statistics. (n.d.)Housing Finance, Australia, February 2017.Australian Bureau of Statistics. [Online]Available at https://www.abs.gov.au/ausstats/abs@.nsf/exnote/5609.0[Accessed 11 May 2017] Collyer, D. (2016). Australias housing bubble and the road to private serfdom. [Online] Prosper. Available at: https://www.prosper.org.au/2016/04/12/australias-housing-bubble-and-the-road-to-private-serfdom/ [Accessed 11 May. 2017]. Dalzell, S. (2016). Push for shared home ownership scheme in NSW to help those locked out of the market. [Online] ABC News. Available at: https://www.abc.net.au/news/2016-07-27/calls-for-nsw-shared-home-ownership-scheme-to-be-introduced/7666232 [Accessed 11 May. 2017]. Exfin. (n.d)The purchase of Australian property by foreign residents.Exfin.[Online]Available at https://exfin.com/australian-property-firb[Accessed 11 May 2017] First Home Owner Grant (New Homes) Scheme. (2017). [Online] Office of State Revenue. Available at: https://www.osr.nsw.gov.au/grants/fhog [Accessed 11 May. 2017]. Holt, J 2009, A Summary of the Primary Causes of the Housing Bubble and the Resulting Credit Crisis: A Non-Technical Paper, Journal of Business Inquiry, vol. 8, no. 1, pp. 120-125. Koziol, M.(2017)Immigrants to blame for high house prices, Businessman Dick Smith claims. The Sydney Morning Herald.[Online]Available at https://www.smh.com.au/federal-politics/political-news/immigrants-to-blame-for-high-house-prices-businessman-dick-smith-claims-20170221-gui72k.html[Accessed 11 May 2017] Law, J. (2016). Housing affordability: Are foreign investors to blame for Australias high property prices. [Online] News.com. Available at: https://www.news.com.au/finance/real-estate/buying/housing-affordability-are-foreign-investors-to-blame-for-australias-high-propertyprices/news-story/710ba2cff1932f0fb3f81ce83a07946b [Accessed 11 May. 2017]. Lusted, P.(2017)First Home Owner Grant to double for Buyers in Regional Victoria. ABC News.[Online]Available at https://www.abc.net.au/news/2017-03-03/first-home-buyers-in-regional-victoria-to-get-a-20k-boost/8320902[Accessed 8 May 2017] Parliamentary Business Committee. (n.d.)Factors influencing the Demand For Housing. Parliamentary Business committee. [Online] Available at https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Former_Committees/hsaf/report/c04[Accessed 11 May 2017] Robb, K.(2017)Perth House bust: What can Sydney and Melbourne learn from the West? Domain. [Online]Available at https://www.domain.com.au/news/perth-house-price-bust-what-can-sydney-and-melbourne-learn-from-the-west-20170404-gvd9g0/[Accessed 11 May 2017] Verrender, I. (2016). Who's the real culprit behind soaring house prices? (Hint: it's not Chinese buyers). [Online] ABC. Available at https://www.abc.net.au/news/2015-06-08/verrender-whos-the-real-culprit-behind-soaring-house-prices/6528710 [Accessed 11 May 2017]