Business Economics Rationale For Increased House Price Essay

Question:

Discuss about the Business Economics Rationale for Increased House Price.

Answer:

Introduction

It has been seen that the home process in the capital cities of Australia has increased by 10.9% in 2016, which is observed as the highest in compare to what was achieved in 2009. It has been further seen that Melbourne and Sydney has been able to witness highest price inflation with 13.7% and 15.5%. The essay proposes to incorporate business economics concept to provide the rationale for increased house price, suggesting ways to reduce the prices and procedure for affording a house in Sydney and Melbourne (Domain 2017).

Rationale for increased house prices of the two capital cities

The main rationale for the increasing prices in the property of the two regions has been evident from the highest observed clearance rates for the Australian capitals. Based on the findings of core logic, it has been further revealed that the various types of the findings of the data has been able to be related to the different aspects of the study which is seen to be associated to the different types of the factors related to the cumulative dwelling values. The revealing has been able to suggest the cumulative change in the dwelling cost of the Sydney and Melbourne is identified to be the highest with 109% and 92.4% respectively (Corelogic.com.au 2017). The median dwelling price in Sydney has been identified to be $ 850000 and Melbourne to be $ 640000.

The impact of the growing price in terms of economy has shown that short supply of the housing property based in Sydney and Melbourne has been seen to increase the overall prices of the property. The short supply is evident with the limited availability of the houses in Melbourne and Sydney region. However, the increasing demand of the property has led to higher price of the property (Dr?es and Hassink 2013). The economic impact with the rising demand and the shortage of the supply of the pretty has been depicted below as follows:

Figure 1: Effect of demand and supply in property prices

(Source: Economicsonline.co.uk 2017)

The various types of types of the non-price reasons for the effect of the demand and supply in the property prices has shown with impact on the interest rates, inflation and the various legislations implemented by the government in Australia. The aforementioned non-prices influences have been identified to show the reason for the increasing prices of property in Australia. During inflation it has been seen that the various types of the main reasons for the increase in the property prices (Shrimpton 2013).

Evidence to Support the answer

The evidences show that in the December 2016, the property prices went up by 10.3% in Sydney and 10.8% Melbourne in compare to the previous year (Scutt 2017). The findings based on core logic it has been further seen that the different types of the findings has revealed that the Australia’s largest and the most expensive housing budget has shown an increase of 0.3% and less than three month old with 5.3%. In compare to the Brisbane, Perth and Adelaide the growth in the property process has been seen to be higher in Sydney and Melbourne. Several evidences have further suggested that the property process in Melbourne has increased more than five times from $ 233250 in 1997 to $1190390 at present (Dr?es and Hassink 2013). The property process in Sydney has been seen to increase six times from $142,000 in 1997 to $943,100 at present. The several types of the other findings of the study have been able to suggest that the growth in the price rises with 1.8% annually for the last five years. This is seen to be adding to almost 2 million in 2037. It has been further discerned Melbourne is seen to be Australia’s fastest growing city, based on the present trends of the growth. It has been further discerned that in 20 years, the average process of the Sydney has been seen to increase from $ 233250 by 50% in 2017. The supply and the demand affecting the prices of the houses has been to affecting the price, this data has been evident in form of the increasing population in Australia from various other nations. This data has been clearly able to suggest that there is a shortage in supply of the houses in Australia. The increasing number of the immigrants in Australia has been seen to be evident in from of the various types the migrants who are seen to be entering the premises Melbourne and Australia, thereby increasing the shortage in the availability of the houses (Dr?es and Hassink 2013).

Suggesting ways to reducing the house prices and the evidence for the same

The ways to reduce the prices of the property based in Melbourne and Sydney has been seen to be based on various types of the changes in the Government Legislations. It has been further seen that the various findings has been able to show that the legislations associated to the property taxes may be reduced so the there is an overall reduction in the prices of the property (Jayantha and Man 2013). Some of the other findings of the study have been further able to suggest that the different types of the consideration for taking various types of the monetary and fiscal measures to reduce the overall rate of the inflation in the country. The main form of the consideration of the study has been further able to show that the steps to reduce the price will be seen in terms of increasing the supply of property. Hence it can be seen that the measures to increase the interest rate and the supply of the property in Melbourne and Sydney area and reducing the interest rate will be able to reduce the prices of the property in the aforementioned regions. As per the previous discussions, the economic repercussions of the decreasing property prices will lead to lower demand and this will in turn increase the supply of the property even to a greater extent(Ong 2013). The low tax in the aforementioned regions will be further able to encourage the buyers in terms of making the financial decision for the investment.

The decreasing impact in the property process based on the supply and demand concepts have been shown below as follows:

Figure 2: Reducing property prices

(Source: Google.co.in 2017)

Procedure of affording a house in Sydney and Melbourne

In order to afford a new property in Sydney or Melbourne for a young professional with a very young family has been seen in terms of sourcing the areas where the property process is seen to be considerably low. The cheapest areas in Melbourne have been seen in terms of Pyalong Crescent, Dallas, where the property price of the property ranges from $ 2500000 to $ 300000. The median price in the Dallas area is seen to be ranging from $ 390500 to $ 400000. In case of buying property in Sydney region the young couple needs to focus on the Suburbs of the region. It has been further seen that the various types of the considerations for the buying a property in the Sydney area comprises in establishing home towns areas of Willmot. Willmot is seen to be one of the most affordable locations of the country with 50 minute drive from CBD. Willmot has been further seen to be one of the most affordable locations in Sydney. The annual income needed to afford a property in Willmot is $81,088. Another way to afford a property in Sydney has been seen in terms of investing in Warragamba, some of the main attractions of the location have been seen with suburbs of Willmot Public School and availability of number of parklands and Grocer. The annual income needed to afford a property in Warragamba is $ 83530. The other consideration can be made by the buyer is seen in terms of investing in a property at Bullaburra region. This area is seen to be 150 Km west of CBD. The annual income needed to afford a property in Bullaburra region is $ 84507 (Dailytelegraph.com.au, 2016).

Conclusion

The various types of the findings of the report has been able to suggest that the main reason for increasing prices in the property of the two regions has been evident from increasing clearance rates for the Australian capitals. It has been further seen that the cumulative change in the dwelling cost of the Sydney and Melbourne is identified to be the highest with 109% and 92.4%. This is also identified as the short supply of the housing property which has shown the increase in the overall prices of the property in Melbourne and Sydney. It has been further observed that the legislations associated to the property taxes may be reduced so the there is an overall reduction in the prices of the property in the aforementioned regions. In order to afford the property, one needs to look forward to invest in areas such as Willmot, Warragamba and Bullaburra in Sydney and Pyalong Crescent, Dallas in Melbourne region.

References

Corelogic.com.au. (2017). Strong start to 2017 as dwelling values rise across seven of Australia’s eight capital cities in January. [online] Available at: [Accessed 4 May 2017].

Dailytelegraph.com.au. (2016). Can you afford to buy in Sydney?. [online] Available at: [Accessed 4 May 2017].

Dr?es, M. I. and Hassink, W. H. J. (2013) ‘House price risk and the hedging benefits of home ownership’, Journal of Housing Economics, 22(2), pp. 92–99. doi: 10.1016/j.jhe.2013.03.002.

Jayantha, W. M. and Man, W. S. (2013) ‘Effect of green labelling on residential property price: a case study in Hong Kong’, Journal of Facilities Management, 11(1), pp. 31–51. doi: 10.1108/14725961311301457.

Domain. (2017). Could you afford Melbourne's cheapest house?. [online] Available at: [Accessed 4 May 2017].

Economicsonline.co.uk. (2017). The UK housing market. [online] Available at: [Accessed 4 May 2017].

Google.co.in. (2017). Supply & Demand Affects Housing Prices - Google Search. [online] Available at: [Accessed 4 May 2017].

Ong, T. S. (2013) ‘Journal of Emerging Issues in Economics, Finance and Banking (JEIEFB) Factors Affecting the Price of Housing in Malaysia Journal of Emerging Issues in Economics, Finance and Banking (JEIEFB)’, An Online International Monthly Journal, 1(55), pp. 2306–367.

Scutt, D. (2017). Sydney house prices increased 20% in a year, and Melbourne isn't far behind. Business Insider Australia. Retrieved 4 May 2017, from

Shrimpton, D. (2013) ‘Convenience bucks property price trend.’, Independent Retail News, p. 4. Available at:

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