Housing Price Prediction of Sydney for Next 20 Years
Discuss about the Master of Professional Accounting for Precarious Employment in Australia.
The client aims to buy a house in Sydney where adequate analysis need to be conducted on the housing prices of Sydney. The data is relatively derived from ABS website, which helps in identifying the price changes in house dwelling in Sydney. Adequate calculation is conducted by deriving the average price, which would eventually help in understanding the level of property prices that would eventually incur in future. The average rate is relatively increased by the inflation rate to determine the actual increment in property value over time. This would eventually help in understanding the level of increment in Sydney Property value. The below graph relatively represents the increment in housing prices over the time of 20 years, which would eventually indicate the changes in price of property (Yates, 2016).
Figure 1: Housing price prediction of Sydney for next 20 years
(Source: As created by the author)
The client relatively gets annual salary of $80,000 which will increase over time to supporter Austrian dreams. The dream of the client is to buy a house in Australia rather in Sydney where she is working currently. The estimation of the rising income group in Sydney is a relatively conducted with the help of data derived from ABS website. The data relatively helped in detecting the level of income growth which will be obtained by the citizens in Sydney. This would also imply to the client where her income will grow exponentially over the period of next 10 years. The calculation is a relatively derived from the per week income increment over the past 20 years, where adequate to your average is taken, while the increment in income growth is average to identify the overall growth in income that will be achieved in Sydney. The below table relatively represents the calculation for income growth and the graph represents the 20-year predicted income growth of the client (Shi et al., 2016).
|
Time |
Income |
Yearly Income |
Two Year Avg |
Income Growth |
|
1994–95 |
$ 642.0 |
$ 33,384.0 |
||
|
1995–96 |
$ 626.0 |
$ 32,552.0 |
$ 32,968.0 |
|
|
1996–97 |
$ 648.0 |
$ 33,696.0 |
$ 33,124.0 |
0.5% |
|
1997–98 |
$ 664.0 |
$ 34,528.0 |
$ 34,112.0 |
3.0% |
|
1999–2000 |
$ 692.0 |
$ 35,984.0 |
$ 35,256.0 |
3.4% |
|
2000–01 |
$ 709.0 |
$ 36,868.0 |
$ 36,426.0 |
3.3% |
|
2002–03 |
$ 726.0 |
$ 37,752.0 |
$ 37,310.0 |
2.4% |
|
2003–04(a) |
$ 806.0 |
$ 41,912.0 |
$ 39,832.0 |
6.8% |
|
2005–06(a) |
$ 870.0 |
$ 45,240.0 |
$ 43,576.0 |
9.4% |
|
2007–08(a) |
$ 994.0 |
$ 51,688.0 |
$ 48,464.0 |
11.2% |
|
2009–10(a) |
$ 981.0 |
$ 51,012.0 |
$ 51,350.0 |
6.0% |
|
2011–12(a) |
$ 1,015.0 |
$ 52,780.0 |
$ 51,896.0 |
1.1% |
|
2013–14(a) |
$ 1,046.0 |
$ 54,392.0 |
$ 53,586.0 |
3.3% |
|
2015–16(a) |
$ 1,070.0 |
$ 55,640.0 |
$ 55,016.0 |
2.7% |
Figure 2: Anticipated income growth for the cline in next 10 years
(Source: As created by the author)
The annual savings that will be conducted by the client is at the levels of$ 38,573, while the annual tax payment will be $ 17,547. Moreover, the property value of $ 445,000 can be accommodated by the client in the current income group and savings. The calculation is depicted in the below tables, regarding the expenses and income of the client with the basic loan requirements.
|
Particulars |
Monthly |
Yearly |
|
Annual Salary |
$ 6,666.67 |
$ 80,000.00 |
|
Yearly expense |
||
|
Amenities |
$ 1,240.00 |
$ 14,880.00 |
|
Rent |
$ 750.00 |
$ 9,000.00 |
|
Expense of living |
$ 1,990.00 |
$ 23,880.00 |
|
Tax |
$17,547.00 |
|
|
Savings |
$ 3,214.42 |
$ 38,573.00 |
Anticipated Income Growth for The Client in Next 10 Years
|
Particulars |
Value |
|
Interest rate |
3.39% |
|
Years |
30 |
|
Max LVR |
80% |
|
Price of the property |
$ 445,000 |
|
Borrowed Amount |
$ 356,705 |
|
Deposit for loan |
$ 88,296 |
|
Stamp Duty |
$ 278 |
The relevant calculations are conducted on property value with or without the insurance premium, which would eventually help in detecting the property that could be bought by the client (Mulliner, Malys & Maliene, 2016). Insurance premium is relatively a measure over the borrower having less than 20% of the overall Property value can get the loan. From the calculation it is detected that with insurance premium of $34,162, LVR of 97% and savings of $88,573 the client can get a property of $900,000. On the other hand, if the insurance premium is not used then the client could only afford a property value of $440,000 due to the composition to deliver 20% of the overall Property value to the bank.
|
With Insurance Premium |
|
|
Particulars |
Value |
|
Property |
$900,000 |
|
Total Stamp Duty value |
$25,990 |
|
Current savings |
$88,573 |
|
After payment savings |
$62,583 |
|
Insurance premium |
$34,162 |
|
Total Bank deposit for loan |
$28,421 |
|
LVR |
97% |
|
Without Insurance Premium |
|
|
Particulars |
Value |
|
Property |
$ 440,000 |
|
Total Stamp Duty value |
$ 278 |
|
Total cost |
$ 440,278 |
|
Deposit for loan |
$ 88,000 |
|
Savings |
$ 88,573 |
|
Extra amount |
$ 573 |
The tables below relatively represent the overall calculation for upfront payment of 20% and upfront payment of 5% that could be conducted by the client. The tables relatively represent the mid value in which the client could buy the property with adequate savings. From the valuation it could be identified that with the 5% of friend payment declined could effectively by the house in 3rd year. On the other hand, the calculations are relatively representing that due to low saving the client can obtain the property with an upfront payment of 20% during 6th year.
|
Year |
Property price |
Savings Target |
5% upfront |
Insurance premium |
Stamp duty |
Amount |
|
0 |
$ 1,020,000 |
$ 88,573 |
$ 51,000 |
$ 44,454 |
$ 31,868 |
$ (38,749) |
|
1 |
$ 1,069,735 |
$ 130,318 |
$ 53,487 |
$ 46,622 |
$ 33,909 |
$ (3,700) |
|
2 |
$ 1,153,990 |
$ 174,124 |
$ 57,700 |
$ 50,294 |
$ 37,368 |
$ 28,762 |
|
3 |
$ 1,244,882 |
$ 219,818 |
$ 62,244 |
$ 54,255 |
$ 41,099 |
$ 62,220 |
|
4 |
$ 1,342,932 |
$ 267,597 |
$ 67,147 |
$ 58,529 |
$ 45,123 |
$ 96,799 |
|
5 |
$ 1,448,704 |
$ 317,565 |
$ 72,435 |
$ 63,138 |
$ 49,465 |
$ 132,527 |
|
6 |
$ 1,562,808 |
$ 369,832 |
$ 78,140 |
$ 68,111 |
$ 54,149 |
$ 169,432 |
|
7 |
$ 1,685,899 |
$ 424,511 |
$ 84,295 |
$ 73,476 |
$ 59,201 |
$ 207,539 |
|
Year |
Property price |
Savings Target |
20% upfront |
Stamp duty |
Difference |
|
0 |
$ 1,020,000 |
$ 88,573 |
$ 204,000 |
$ 31,868 |
$ (147,295) |
|
1 |
$ 1,069,735 |
$ 130,318 |
$ 213,947 |
$ 33,909 |
$ (117,538) |
|
2 |
$ 1,153,990 |
$ 174,124 |
$ 230,798 |
$ 37,368 |
$ (94,042) |
|
3 |
$ 1,244,882 |
$ 219,818 |
$ 248,976 |
$ 41,099 |
$ (70,257) |
|
4 |
$ 1,342,932 |
$ 267,597 |
$ 268,586 |
$ 45,123 |
$ (46,113) |
|
5 |
$ 1,448,704 |
$ 317,565 |
$ 289,741 |
$ 49,465 |
$ (21,640) |
|
6 |
$ 1,562,808 |
$ 369,832 |
$ 312,562 |
$ 54,149 |
$ 3,122 |
|
7 |
$ 1,685,899 |
$ 424,511 |
$ 337,180 |
$ 59,201 |
$ 28,130 |
|
8 |
$ 1,818,685 |
$ 481,721 |
$ 363,737 |
$ 64,652 |
$ 53,332 |
|
9 |
$ 1,961,929 |
$ 541,586 |
$ 392,386 |
$ 70,531 |
$ 78,669 |
|
10 |
$ 2,116,455 |
$ 604,238 |
$ 423,291 |
$ 76,874 |
$ 104,073 |
|
11 |
$ 2,283,153 |
$ 669,813 |
$ 456,631 |
$ 83,717 |
$ 129,465 |
|
12 |
$ 2,462,980 |
$ 738,453 |
$ 492,596 |
$ 91,098 |
$ 154,759 |
|
13 |
$ 2,656,970 |
$ 810,307 |
$ 531,394 |
$ 99,061 |
$ 179,852 |
|
14 |
$ 2,866,240 |
$ 885,533 |
$ 573,248 |
$ 107,651 |
$ 204,634 |
|
15 |
$ 3,091,992 |
$ 964,292 |
$ 618,398 |
$ 116,917 |
$ 228,977 |
Adequate changes in the overall mortgage payment will be conducted by the client if Interest rates increased from the levels of 3.39% to 7% in 4th year after buying the house. The calculation relatively represents that after purchasing the property if the interest rate rises to 7% the client will not have any kind of negative impact on its mortgage payments, as the savings is a relatively high, which would eventually help in supporting the extra payments needed by the bank (Hill & Syed, 2016).
|
Year |
Interest rate |
Mortgage Payment |
Saved |
Savings |
|
4 |
3.39% |
$62,859 |
$ 119,729 |
$56,871 |
|
5 |
3.39% |
$62,859 |
$116,761 |
$53,903 |
|
6 |
3.39% |
$62,859 |
$116,287 |
$53,428 |
|
7 |
7.00% |
$94,417 |
$118,424 |
$24,006 |
|
Property value |
$ 1,244,882 |
|||
|
Loan amount |
$ 1,182,638 |
The financial plan drafted for the client Italy supports her desire to achieve the Austrian dream of having a house in Sydney. The calculations conducted in the overall assessment relatively uses different kind of Estimation and evaluation to determine the growth in property price and income in Sydney. However, any kind of the policy change that will be conducted by the Australian government would directly affect the financial plan, while it would nullify the benefits that is portrayed by the proposed plan. The circumstances that would nullify the gains provided by the financial plan is the income of the client, which needs to be study and increasing for supporting the mortgage payments in future.
References:
Abs.gov.au. (2018). Ato.gov.au. Retrieved 24 May 2018, from https://www.ato.gov.au/calculators-and-tools/simple-tax-calculator/
Baker, E., Bentley, R., Lester, L., & Beer, A. (2016). Housing affordability and residential mobility as drivers of locational inequality. Applied Geography, 72, 65-75.
Beer, A., Bentley, R., Baker, E., Mason, K., Mallett, S., Kavanagh, A., & LaMontagne, T. (2016). Neoliberalism, economic restructuring and policy change: Precarious housing and precarious employment in Australia. Urban studies, 53(8), 1542-1558.
Bentley, R. J., Pevalin, D., Baker, E., Mason, K., Reeves, A., & Beer, A. (2016). Housing affordability, tenure and mental health in Australia and the United Kingdom: a comparative panel analysis. Housing Studies, 31(2), 208-222.
Hill, R. J., & Syed, I. A. (2016). Hedonic price–rent ratios, user cost, and departures from equilibrium in the housing market. Regional Science and Urban Economics, 56, 60-72.
Huisman, C. J. (2016). A silent shift? The precarisation of the Dutch rental housing market. Journal of Housing and the Built Environment, 31(1), 93-106.
Martin, C. (2016). The Australian housing market is a house of cards. City Futures Blog.
Mulliner, E., Malys, N., & Maliene, V. (2016). Comparative analysis of MCDM methods for the assessment of sustainable housing affordability. Omega, 59, 146-156.
Shi, S., Valadkhani, A., Smyth, R., & Vahid, F. (2016). Dating the timeline of house price bubbles in Australian capital cities. Economic Record, 92(299), 590-605.
Stampduty.calculatorsaustralia.com.au. (2014). Stamp Duty Calculator. Retrieved 24 May 2018, from https://stampduty.calculatorsaustralia.com.au/
Westpac.com.au. (2018). Westpac.com.au. Retrieved 24 May 2018, from https://www.westpac.com.au/personal-banking/home-loans/calculator/stamp-duty-calculator/
Yates, J. (2016). Why does Australia have an affordable housing problem and what can be done about it?. Australian Economic Review, 49(3), 328-339.
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