Increased foreign investments
Discuss about the Booming Housing Market In Australia.
With respect to the booming business in house markets in Australia, specifically in the two capitals of Sydney and Melbourne, the question that remains unanswered is the reason as to why housing prices are rated relatively so high yet in Australia there are more than enough households. This still remains a mystery despite various common clarifications and explanations. Some of these explanations include that the demand of housing in Sydney is so high that the suppliers are not able to meet the peoples demand (Brooks, 2012). Others may argue about the few rich individuals who compete in showing off by buying these high priced houses thus increasing their prices due to increased competition. This paper shall the various reasons that led to high prices.
One of the drivers of high prices of housing in Sydney and Melbourne is increased foreign investments. For instance, the Chinese residents who are relatively rich have been known to invest in buying these houses. The increased competition between the foreign investors and the local investors has led to the house owners to dramatically increase the housing prices so as to accommodate the pressure (Cook, Davison, & Crabtree, 2016). The supply and demand curve shifts due to these high binders who compete in buying these flourish houses found in the two capitals. These Chinese investors have even caused their government and the government of Australia to such for policies which shall regulate this massive investment and movement towards housing in Sydney.
Friendly government regulations have also participated in driving housing prices up. Regulations such as giving permits and licenses to housing contractors and also providing passports to these foreign investors have led to massive and high housing prices over the past few years (Dept, 2018). The government generates income from these foreign and local investors who buy these high priced houses hence, the investors been a source of income and revenues. These regulations have dramatically led to high housing prices.
Urban planning and land supply has also contributed to the high housing prices in Sydney and Melbourne. The two capitals authorities, such as the housing regulators and urban planners have discovered that the two cities are densely populated by the wealth community thus these may be seen as a source of income (Gurran & Bramley, 2017). The urban plan may also have set a degree of living standard that might be met by only a few selected groups by the criteria of high standards thus leading to the increased housing prices. This is because only the local and foreign investors who are wealthy enough could only meet the criteria thus leading to high prices. For instance, requirement of by the local authorities to meet criteria of construction of real estates. High construction and maintenance cost may have pushed the housing prices up.
Friendly government regulations
Relatively high tax associated with property owning is another suspected driver of high housing prices. If high taxation rates are associated to housing construction, this in return will relatively lead to high housing prices (Hulse, Pawson, Reynolds, & Herath, 2014). This is as a result of contractors meeting their construction cost and also generating benefits out of the effort. These taxes imposed such as increased taxation in building and constructing materials may lead to end result of houses been priced highly.
Low interest rates may be yet another driver of high housing prices. Interest rates related to living standards and cost of construction may be relatively low hence to increased demand and supply (In Healey, 2016). In return, this leads to increased prices for both properties and services such as housing prices. These low interest rates enhance maximum profit generation thus positively and widely encouraged by the natives of Sydney and Melbourne.
Another driver may be as a result of high domestic investors purchasing the houses in the capitals of Sydney and Melbourne. Local investors may contribute to high house prices due to they tend to set some standard and class which acts as a criteria for anyone interested in purchasing the houses in a particular area or region (Junankar, 2016).
The following are the suggested ways in which house prices can be reduced.
Unhealthy competition promotes inflation whereby the weak are denied the right of purchasing houses due to the high prices attached to the houses. By limiting the competition, this will create a healthy competitive environment whereby everyone has equal rights and abilities to purchase houses at fair prices (Laukea & ‘Laukea, 2012). The competition can be limited by adequately providing various choices of housing categories whereby an individual can choose from thus meeting the taste and preferences of people. If taste and preferences of different people are met, this reduces competition as these people are contented with what they have purchased due to diversity and variety availed. Reduced competition reduces demand thus in return this will force the suppliers to reduce the housing price due to lack of demand.
Inducing penalties and charges to those individuals who have a tendency of leaving their homes empty. Some rich and extravagant individual just buy houses and do not live in them. Some just buy these houses and rarely live in them just for the purposes of show off or just as to be at per with their competitors (Laukea & ‘Laukea, 2012). This action denies the rest of group members with no houses live in thus leaving the few available to be highly charged so as to meet the competition. Some of the competitors may not be so rich hence this forces them out of the business without their consent. Penalty introduction will discourage such behavior of purchasing and abandoning the houses hence increasing availability of houses hence in return this will ensure downfall of prices regarding the purchase of houses.
Urban planning and land supply
Introduction of friendly incentives which will enhance a cluster of houses availability in these two capitals and thus lowering the density of apartments blocks. In short, these means creation of more space for accommodation due to shared space between the occupants instead of purchasing private or individual houses which occupy large spaces which can be used to construct more houses to accommodate more people (McKenzie & Rowley, 2013). Increased houses will in turn reduce housing competition thus reducing the prices thus making it available for the members of the society.
By reviewing and reforming laws concerning the urban planning sector. Some of these laws do not reflect in changing the demand of the housing market. Some laws are usually very strict thus forcing out of the market some of the members of the society from owning a property. These laws may include long and tiring procedures which discourage many who quit in the middle of the process (Winter, Albone, Blaze-Vaughan, & Skinner, 2011). Some may involve too much paper works and follow up that might be a discouraging procedure to go through. Hence reviewing such laws might reduce some of these procedures which lead to end price been so high. If reformed, some part are cut off and so is the prices thus different individual may acquire the houses.
Another way that will facilitate down fall of housing prices is the reformation of stamp duty exemptions. Stamp duties do not cover all regions of property owning, thus by reforming such stamp exemptions, this will mean that more people are able to own their own housing incomes since the housing priced will be forced to reduce so as to accommodate the change in individuals ownership. For instance, NSW provides stamps to a group of people who are interested in purchasing a house for the first time which are pocket friendly and economically wise. Thus, switching the stamp duty to land tax, it will therefor lead to improved housing and property affordability (Wu, Chyl, & Chan, 2010). This is met by making it easier for families to shift their essentials change over a period of time. In return, this will enable better use of existing houses available hence reducing the increased cost of owning a property. The shift from stamp duty to land tax is supported by the NSW organization in examining the significant of change.
If I am a young professional with a very young family, the following reasons are shown on how one can afford to buy a house in such a costly housing market in Melbourne or Sydney at such current exhausting prices;
Relatively high tax associated with property owning
I would start by keeping my savings. Little by little, the savings shall accumulate and after a certain period of time, they would have accumulated enough to purchase and own a property of my own. This may take some time but since am young, with time these savings will be enough to have a property I can confidently claim to be mine (Winter, Albone, Blaze-Vaughan, & Skinner, 2011).
I would also seek advice from financial experts and planners about how I can purchase a property of my own. Getting advices from these experts broadens my thinking capacity and also will enhance critical thinking towards achieving my goals. In most cases, planners and financial experts monitors ones spending behavior and trend thus according to the status of finances and incomes, they will be able to give me the appropriate advice on how to go concerning the idea of purchasing my own house despite the harsh economic rates in Sydney or Melbourne.
Learning about investments would also play a critical part in my target setting (Junankar, 2016). I may have saved enough savings in my account but it would be critical for me to learn about the investments as the market environment keeps on changing from time to time. Thus, from learning about the investments, this will boost my decision making hence helping me in achieving and attaining my set goals and objectives of buying a house in Sydney or Melbourne.
Conclusion
Housing is one of the essential basic needs of human needs as houses provide shelter from severe sun burns, rain and adverse weather conditions. Despite the high housing prices, the business is booming in Sydney and Melbourne due to various factors. Some are pushed out of the market by these forces while other thrives even in such conditions.
References
Brooks, A. (2012). Mortgage stressbusters. Hoboken: john willey & sons.
Cook, N., Davison, A., & Crabtree, L. (2016). Housing and home unbound: intersections in economics, environment and politics in australia. Abingdon: Taylor and francis.
Dept, I. M., & A, P. (2018). Australia. washington D.C.: Iinternational monetary fund.
Gurran, N., & Bramley, G. (2017). Urban planning and the housing market: international perspectives for policy and practice. London: Palgrave Macmillan.
Hulse, K., Pawson, H., Reynolds, M., & Herath, S. (2014). Disadvantages places in urban australia: Analysing socio-economic diversity and housing market performance. Melbourne: Australian housing and urban research institute.
In Healey, J. (2016). Housing affordability. Thirroul: Spinney press.
Junankar, P. N. (2016). Economics os immigration: the impact of immigration on the australian economy. Hampshire: palgrave McMillan.
Laukea, S. L., & ‘Laukea, C. P. (2012). The queen and i: A story of dispossessions and reconnections in huwai. Berkeley: university of california press.
McKenzie, F. H., & Rowley, S. (2013). Housing market failure in a booming economy. new york: routledge.
Newstead, A., Hessey, R., Borghesi, E., & Klinner, K. (2014). the dealer is the devil: adventures in the aborigional art trade. Blackhealth: brandl and schlesinger.
Winter, A., Albone, C., Blaze-Vaughan, S., & Skinner, M. (2011). selling houses australia. Collingford: madman entertainment.
Wu, H. L., Chyl, L., & Chan, N. (2010). an investment approach to the emerging housing markets . pacific: real estate society.
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