Recently,housing affordability in the cities of Melbourne and Sydney has been rare due to the high prices.The unusually high prices has prompted the reason for government involvement.According to some economists, high house prices are attributed to the short supply of houses thus prompting high prices as per the demand laws.Further,high rates of immigration into the two cities has put pressure on the already short supply of decent and affording housing facilities(Collyer,2016)The housing prices of Sydney and Melbourne are regarded among the highest globally.Despite the fact that housing is a basic need,most of the Australian population is unable to afford decent housing facilities not just in Melbourne and Sydney but in other areas of the Australian states hence the reason for government action to lower the skyrocketing housing prices.
Predominantly,interest rates affect financial credit facilities.The fact that potential house owners can access financial assistance from credit institutions at relatively low-interest rates has enabled many dream owners attain their goals.Typically,low-interest rates on loans attracts many persons due to the low repaying rates(Parliamentary Business Committee,N.d) thus making housing prices to be relatively high because of the low-interest rate house buyers are more meaning the demand for houses will go high(Holt,2009).Due to high demand for houses,the prices will likely go high(Robb,2017).Largely,easy accessibility to low-interest rate credit facilities has contributed to high housing prices in the cities,Sydney and Melbourne.
Largely,financial regulation by the Australian government has contributed to the high housing prices in the cities of Sydney and Melbourne.Easy access to financial services through credit facilities has availed potential homeowners the chance to afford decent houses despite the high prices.Inadequate or relaxed government regulation of the financial sector has availed easy flow and access to the Australian population which has enabled most people to afford housing in various Australian States.Credit facilities has made it easy to afford luxurious housing despite a persons inability to pay now.Favorable repayment schemes has expanded access to credit facilities and affordable housing.
In addition,competition has added to the unaffordability of houses in most Australian states like Melbourne.Notably,there s fierce competition between housing providers local and foreign thus propelling housing prices to go up.There’s the ultimate goal to make profits by both local and foreign housing suppliers(Exflin,N.d)Further the migration of foreign migrants into the cities of Melbourne and Sydney has partly contributed to the high housing prices.In a bid to maximize their profits,foreign and local housing service producers charge fairly high prices for the houses thus making it unaffordable for majority of the Australian population.The population increase of foreign housing providers has prompted local housing constructors to raise the prices to stay in business(Verrender,2015)
Typically,urban areas have a large influx of migrants looking for better economic prospects thus growing the population in urban areas to which Sydney and Melbourne are no strangers to.Population increase creates an increase in demand for goods and services,same applies to housing facilities.Following the population increase,there’s a demand increase for houses which is a challenge for housing providers(Koziol,2017)The limited housing supply prompted by the ever growing population increase has made it impossible for suppliers to completely fill the void thus charging of high prices of housing due to the limited availability of dwelling facilities in the two Australian cities.
Furthermore,the change of average household sizes has made housing prices shoot up.Mainly,modern housing suppliers in Melbourne and Sydney have adopted fairly large and luxurious household sizes which are relatively expensive to build up hence the additional construction costs are transferred to consumers through high housing prices to enable constructors make profits.Ultimately,the goal of operating a business is to make profits thus the high cost of labor and construction materials ought to be recovered by constructors through high housing prices.The fact that many housing suppliers are adopting large and luxurious households has created high demand for the existing smaller household units.
Regulation of the Housing Sector
Subsequently,there need for government intervention in Sydney and Melbourne following the housing unaffordability for most of the Australian population due to high housing prices.Universally,housing is a widely recognized basic human right.However,the high prices of housing facilities in Sydney and Melbourne has promoted homelessness due to its exceedingly high housing prices.Several measures and policies have been implemented to try and minimize the negative consequences of the high housing prices on the Australian population.
The availability and provision of subsidies and financial incentive to housing suppliers in Australia to increase the supply of houses,has high chance of reducing high housing prices.This is due to the fact that subsidies and financial incentives reduce the cost of construction for housing facilities for housing providers who will in turn relatively affordable housing prices to make profits.In the absence of high construction costs ,housing providers are unlikely to charge high prices.With high incentives and subsidies more houses will be supplied to meet the demand for houses.Due to demand and supply of houses being met the prices of houses will go back to normal in cities such as Sydney and Melbourne.
Notably,the availability of public housing facilities by the Australian government will not only create employment opportunities for constructors but in turn increase the supply of houses in all Australian states inclusive of Sydney and Melbourne.(Dalzell,2016)Through the supply of public housing facilities,homelessness will greatly reduce due to the decent and affordable housing facilities thus the need for government to heavily invest in the public housing scheme.Through public housing initiatives,the rising housing demand in Sydney and Melbourne will reduce because potential house owners will have a variety to choose from at fairly cheaper prices as compared to the high prices,high demand and limited supply of houses in cities like Melbourne.
Alternatively,there are other ways to afford home ownership in Australia which has made it possible to own decent housing in highly priced areas.The Australian Bureau of Statistics has explored various forms of alternative housing methods.The easy accessibility and affordability of housing facilities through alternative ways has become popular among the Australian population especially among low and medium income earners(Australian Bureau of Statistics,N.d)The availability of housing schemes and shared home ownership arrangements has made it possible to access decent and affordable housing in highly priced areas like the two Australian cities (Dalzell,2016)Primarily,the Department of Housing in Australia has offered homeowners part home ownership deals with the compulsory requirement of opening an account with the department.
Primarily,shared home ownership is offered to potential homeowners and the government of Australia.The government owns a 30% stake of the shared home with open options of buying out the government and acquiring full ownership.Through this shared home ownership schemes,decent housing has been availed to a large Australian population thereby reducing the demand for housing facilities and reducing homelessness in most Australian states and cities.Potential house owners are encouraged to seek shared home ownership arrangements due to the friendly terms available despites a person’s inability to fully acquire the houses.Start up loan accounts with the housing department of Australia has accorded decent housing facilities to a substantial number of Australian current homeowners.
Predominantly,the easy access and availability of first time home owner grants has created increased demand for housing facilities in most Australian States.Primarily,new homeowners have been offered housing grants on the first home ownership(Office of State Revenue,2017).First time homeowners are required to make application grants in which case successful first home ownership grants applicant are awarded grants which enables them to acquire housing facilities(Lusted,2017)This first home grant ownership has made it easy for young professionals to afford decent and highly priced home ownership in highly priced areas like the cities of Sydney and Melbourne.First home ownership grant application has made the dream of home ownership so much timely and highly attainable for young professionals.
Predominantly,mortgage has made it possible for most homeowners to afford decent and affordable housing facilities.Though banking and other financial institutions mortgage arrangements have been availed to potential homeowners with favorable repayment and buying out options which has popularized this mode of home ownership acquisition.Globally,mortgaging is a common option for home ownership.The immediate possession of housing facilities despite fully paying for the housing facilities has made mortgaging easy ,accessible and affordable for young professionals worldwide thus the need for further investment into the mortgaging system by the Australian government to reduce housing demand and the growing high prices in Sydney and Melbourne.
Despite the high housing prices in Sydney and Melbourne,there is still hope for the housing prices to go down.Currently,the high housing prices are due to the high demand for housing facilities but limited supply.In addition,the ever-growing population growth into the cities of Sydney and Melbourne has increased the demand for housing in that there s a supply inadequacy.However,the Australian Government needs to regulate the housing sector in Australia especially in cities.Additionally,alternative home ownership options have been availed to the Australian population through mortgages,grants and credit financial facilities has availed ownership options for young professionals to own decent dwelling facilities in the highly priced Australian cities of Sydney and Melbourne.
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/[email protected]/exnote/5609.0[Accessed 1 June 2017]
Collyer, D. (2016). Australia’s 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 1 June. 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 1 June. 2017].
Exfin. (n.d)The purchase of Australian property by foreign residents.Exfin.[Online]Available at https://exfin.com/australian-property-firb[Accessed 1 June 2017]
Office of State Revenue.(2017).First Home Owner Grant (New Homes) Scheme. [Online] Office of State Revenue. Available at: https://www.osr.nsw.gov.au/grants/fhog [Accessed 1 June 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.[Accessed 1 June 2017]
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 1 June 2017]
Law, J. (2016). Housing affordability: Are foreign investors to blame for Australia’s 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 1 June. 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 1 June 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 1 June 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]
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