Investigating Historical Housing and Income Data
Figure 1: Depicting the future housing price of Sydney
(Source: As created by the author)
The above figure helps in identifying the future rising prices of Sydney. which started from the levels of 1,020,000. this relevant evaluation of the future prices would eventually help in understanding the level of prices that will income during the purchase of house in Sydney. adequate average method is used to identify the relevant changes in value of housing prices in Sydney from 2002 to 2017. These price changes would eventually help in understanding the level of Price hike that will be witnessed by the Sydney housing industry. The ABS website relatively provides all the relevant data regarding the price changes of housing in Sydney over the past 15 years which would eventually help in predicting the future 20 years price (Baur & Heaney, 2017). The data of Median Price of Established House Transfers (Unstratified) Sydney and Median Price of Attached Dwelling Transfers (Unstratified) Sydney is used for the calculation purposes.
|
Time |
Income |
Yearly Income |
Three Year Avg |
Income Growth |
|
1994–95 |
$ 642.00 |
$ 33,384.00 |
||
|
1995–96 |
$ 626.00 |
$ 32,552.00 |
||
|
1996–97 |
$ 648.00 |
$ 33,696.00 |
$ 33,210.67 |
|
|
1997–98 |
$ 664.00 |
$ 34,528.00 |
$ 33,592.00 |
1.15% |
|
1999–2000 |
$ 692.00 |
$ 35,984.00 |
$ 34,736.00 |
3.41% |
|
2000–01 |
$ 709.00 |
$ 36,868.00 |
$ 35,793.33 |
3.04% |
|
2002–03 |
$ 726.00 |
$ 37,752.00 |
$ 36,868.00 |
3.00% |
|
2003–04(a) |
$ 806.00 |
$ 41,912.00 |
$ 38,844.00 |
5.36% |
|
2005–06(a) |
$ 870.00 |
$ 45,240.00 |
$ 41,634.67 |
7.18% |
|
2007–08(a) |
$ 994.00 |
$ 51,688.00 |
$ 46,280.00 |
11.16% |
|
2009–10(a) |
$ 981.00 |
$ 51,012.00 |
$ 49,313.33 |
6.55% |
|
2011–12(a) |
$ 1,015.00 |
$ 52,780.00 |
$ 51,826.67 |
5.10% |
|
2013–14(a) |
$ 1,046.00 |
$ 54,392.00 |
$ 52,728.00 |
1.74% |
|
2015–16(a) |
$ 1,070.00 |
$ 55,640.00 |
$ 54,270.67 |
2.93% |
|
Average income Growth rate |
4.60% |
Figure 2: Depicting the future income of the client based on Sydney
(Source: As created by the author)
The graph and table relatively represent the past and future growth rate of income that will be obtained in Sydney by individuals. Adequate calculation of growth rate is conducted with the historical yearly income of citizens living in Sydney, where the 3-year average of the yearly income is taken and the Price changes considered as the growth rate. This would eventually help in understanding the level of growth in income that is obtained by citizens in Sydney (Hawkey, 2017). The average household income of the citizens living in Sydney has relatively grown at the levels of 4.60%, which will initially help in understanding the level of growth in income obtained by the client. The figure relatively represents the future income of the client who is situated in Sydney where the initial starting salary would be $ 80,000 per year, which will increase to $ 125,450.38 in 10 years. The growth rate is calculated with the help of data provided by ABS website regarding the changes in visit through 1994 to 2016.
|
Particulars |
Monthly |
Yearly |
|
Annual Salary |
$ 6,666.67 |
$ 80,000.00 |
|
Yearly expense |
||
|
Amenities |
$ 1,450.00 |
$ 17,400.00 |
|
Rent |
$ 1,100.00 |
$ 13,200.00 |
|
Expense of living |
$ 2,550.00 |
$ 30,600.00 |
|
Tax |
$ 17,547.00 |
|
|
Savings |
$ 2,654.42 |
$ 31,853.00 |
|
Particulars |
Values |
|
Interest rate |
3.69% |
|
Years |
30 |
|
Max LVR |
80% |
|
Price of the property |
$ 400,000 |
|
Borrowed Amount |
$ 318,147 |
|
Deposit for loan |
$ 81,853 |
From the calculation of above table, the relevant tax rate and net savings of the client could be identified. The client would eventually pay tax of $17,547, while the savings will be at the levels for the year is of $31,853, while the total savings is $81,853. Moreover, from the valuation conducted on the deposit savings of the client the relevant Property value of $ 400,000 can only be purchased due to the max LVR of 80%, which is been provided by the bank. Additionally, the interest rates on home loans for citizens in Sydney at the levels of 3.69%.
|
With Mortgage Premium |
|
|
Particulars |
Values |
|
Property |
$ 850,000 |
|
Total Stamp Duty value |
$ 33,740.00 |
|
Current savings |
$ 81,853.00 |
|
Initial payment |
$ 48,113.00 |
|
Insurance premium |
$ 32,327.00 |
|
Total Bank deposit |
$ 80,440.00 |
|
Savings |
$ 1,413.00 |
Calculating Net Income and Capacity of Monthly Repayment
|
Without Mortgage Premium |
|
|
Particulars |
Values |
|
Property |
$ 405,000.00 |
|
Total Stamp Duty value |
$ 278.00 |
|
Total cost |
$ 405,278.00 |
|
Deposit for loan |
$ 81,000.00 |
|
Savings |
$ 81,853.00 |
The calculation relatively represents the overall property that could be bought by the client with mortgage premium and without mortgage premium. There is a significant difference in the property value if mortgage premium is not used by the client during the purchase of the property. as without the mortgage premium the client needs to pay 20% of the overall Property value from its savings. However, the client currently has a total savings of $ 81,853, which will allow him to buy the property with a value of $ 405,000. On the other hand, if insurance premium is paid by the client then the total Property value will be at the levels of $ 850,000With the insurance premium of $ 32,327.00. Therefore, the difference between the property value with and without mortgage premium can be identified, where with the mortgage premium the client would eventually get a bigger house for herself (De Visscher, 2016).
|
Year |
Property price |
Savings Target |
20% upfront |
Stamp duty |
Difference |
|
0 |
$ 1,020,000 |
$81,853 |
$204,000 |
$41,868 |
$(164,015) |
|
1 |
$ 1,061,758 |
$115,589 |
$212,352 |
$43,582 |
$(140,345) |
|
2 |
$ 1,131,867 |
$151,309 |
$226,373 |
$46,460 |
$(121,525) |
|
3 |
$ 1,206,605 |
$188,915 |
$241,321 |
$49,528 |
$(101,933) |
|
4 |
$ 1,286,278 |
$228,537 |
$257,256 |
$52,798 |
$(81,516) |
|
5 |
$ 1,371,211 |
$270,284 |
$274,242 |
$56,284 |
$(60,243) |
|
6 |
$ 1,461,753 |
$314,270 |
$292,351 |
$60,001 |
$(38,082) |
|
7 |
$ 1,558,274 |
$360,616 |
$311,655 |
$63,963 |
$(15,001) |
|
8 |
$ 1,661,168 |
$409,449 |
$332,234 |
$68,186 |
$9,029 |
|
9 |
$ 1,770,856 |
$460,901 |
$354,171 |
$72,688 |
$34,042 |
|
10 |
$ 1,887,786 |
$515,112 |
$377,557 |
$77,488 |
$60,066 |
|
11 |
$ 2,012,438 |
$572,226 |
$402,488 |
$82,605 |
$87,134 |
|
12 |
$ 2,145,321 |
$632,398 |
$429,064 |
$88,059 |
$115,275 |
|
13 |
$ 2,286,978 |
$695,787 |
$457,396 |
$93,874 |
$144,518 |
|
14 |
$ 2,437,988 |
$762,561 |
$487,598 |
$100,072 |
$174,891 |
|
15 |
$ 2,598,970 |
$832,897 |
$519,794 |
$106,680 |
$206,423 |
|
Year |
Property price |
Savings Target |
5% upfront |
Insurance premium |
Stamp duty |
Amount |
|
0 |
$ 1,020,000 |
$ 81,853 |
$ 51,000 |
$ 43,758 |
$ 41,868 |
$ (54,773) |
|
1 |
$ 1,061,758 |
$ 115,589 |
$ 53,088 |
$ 45,549 |
$ 43,582 |
$ (26,631) |
|
2 |
$ 1,131,867 |
$ 151,309 |
$ 56,593 |
$ 48,557 |
$ 46,460 |
$ (302) |
|
3 |
$ 1,206,605 |
$ 188,915 |
$ 60,330 |
$ 51,763 |
$ 49,528 |
$ 27,294 |
|
4 |
$ 1,286,278 |
$ 228,537 |
$ 64,314 |
$ 55,181 |
$ 52,798 |
$ 56,244 |
|
5 |
$ 1,371,211 |
$ 270,284 |
$ 68,561 |
$ 58,825 |
$ 56,284 |
$ 86,614 |
|
6 |
$ 1,461,753 |
$ 314,270 |
$ 73,088 |
$ 62,709 |
$ 60,001 |
$ 118,472 |
|
7 |
$ 1,558,274 |
$ 360,616 |
$ 77,914 |
$ 66,850 |
$ 63,963 |
$ 151,890 |
The calculation related to the overall amount that will be left after purchase of a particular property can be identified from the above tables with upfront payment of 20% and 5%. The calculations relatively represent that with the upfront payment of 20% the client would only be able to purchase the house on year 8, while with the use of 5% upfront payment the property can be bought within 5 years.
|
Year |
Interest rate |
Mortgage Payment |
Saved |
Savings |
|
6 |
3.69% |
$ 71,862.17 |
$ 145,439.18 |
$ 73,577.01 |
|
7 |
3.69% |
$ 71,862.17 |
$ 135,054.81 |
$ 63,192.64 |
|
8 |
3.69% |
$ 71,862.17 |
$ 127,455.13 |
$ 55,592.97 |
|
9 |
7.00% |
$ 103,998.81 |
$ 122,778.64 |
$ 18,779.83 |
|
Time |
360 |
|||
|
Property value |
$754,851.00 |
|||
|
Loan amount |
$717,108.45 |
The calculations conducted in the above table and table represents the overall mortgage payment that will be conducted by the company after the purchase of property. In addition, the calculation also indicates the change in interest rate on your phone after the purchase of the property, which will directly impact the mortgage payment capability of the client. The calculation relatively represents that during year 9 the interest rate will increase from 3.69% to 7%, which will directly raise the level of mortgage payment from $ 71,862.17 to $ 103,998.81. However, the savings that will be conducted by the client would be enough to pay for the mortgage payments during year 9 (Guironnet, Attuyer & Halbert, 2016).
The financial plan drafted for the client would only backfire if different situation occurs, which might negatively impact the assumptions made in the plan. the changes in interest rate for more than 7% would directly have negative impact on the capability of the client to pay its mortgage and does the Dreamhouse would not be possible. Moreover, the situation where client does not lose her job is also evaluated, which mitre directly impact the financial plan and effect ability of the client to fulfil her Australian dream. The risk that is listed in the above scenario relatively depicts the worst case condition for the client where no financial plan could help to achieve the Austrian dream.
References
Abs.gov.au. (2018). Ato.gov.au. Retrieved 26 May 2018, from https://www.ato.gov.au/calculators-and-tools/simple-tax-calculator/
Baur, D. G., & Heaney, R. (2017). Bubbles in the Australian housing market. Pacific-Basin Finance Journal, 44, 113-126.
Chia, W. M., Li, M., & Zheng, H. (2017). Behavioral heterogeneity in the Australian housing market. Applied Economics, 49(9), 872-885.
De Visscher, F. M. (2016). Financing transitions: Managing capital and liquidity in the family business. Springer.
De Visscher, F. M. (2016). Financing transitions: Managing capital and liquidity in the family business. Springer.
Guironnet, A., Attuyer, K., & Halbert, L. (2016). Building cities on financial assets: The financialisation of property markets and its implications for city governments in the Paris city-region. Urban Studies, 53(7), 1442-1464.
Hawkey, J. (2017). Exit Strategy Planning: Grooming your business for sale or succession. Routledge.
Living, C. (2018). Cost of Living in Melbourne, Australia. May 2018 prices in Melbourne.. Expatistan, cost of living comparisons. Retrieved 26 May 2018, from https://www.expatistan.com/cost-of-living/melbourne
Macaulay, S. (2018). Non-contractual relations in business: A preliminary study. In The Law and Society Canon (pp. 155-167). Routledge.
Martin, C. (2016). The Australian housing market is a house of cards. City Futures Blog.
Rogers, D., Lee, C. L., & Yan, D. (2015). The politics of foreign investment in Australian housing: Chinese investors, translocal sales agents and local resistance. Housing Studies, 30(5), 730-748.
Stampduty.calculatorsaustralia.com.au. (2014). Stamp Duty Calculator. Retrieved 26 May 2018, from https://stampduty.calculatorsaustralia.com.au/
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