Discuss about the Prices and Entrepreneurship Evidence System.
The research paper is based on the factors affecting the rise of housing prices in Australia. The economic growth of Australia is related to the housing sector. The paper is analysed the current housing market conditions within Australia. Over the recent years, the paper is examined the factors which caused increase into housing prices (Knoll, Schularick, & Steger, 2017). There are various factors which affect the housing prices on economy of Australia. Home ownership is considered as a key element into higher standard of living. Approximately 70% of the Australian households are living into ownership occupied dwellings. A proportion of the house owners without the mortgage are decreased over time that is considered as indication of the household within the Australian economy. Cesa?Bianchi, Cespedes and Rebucci (2015) stated that housing plays a role to the social well being within Australians. The housing provides a social as well as economic environment which is required for the political stability along with prosperity. Throughout five years from the year 2000-01 to 2005-06, the established prices of the house are increased by more than 110% (which is an average of 16.2% a year) (Ashworth & Perera, 2015). The paper will analyse the housing market of Australia and investigate the factors drive rise into housing prices. There is also evaluation of the effects of rise into prices.
Rise into the household debt is problematic for the economy into medium to the long term. It supports of slow as well as steady approach towards the interest rate similar which is observed at the economics around the world. There is stronger relationship among the price of household changes along with households within Australia. The results show that there is $1,000 increase into the value of house which is associated with $240 increase into the debt of household among the house owners. When there is an increase into housing wealth, then there is reduction of debt services (Ferrero, 2015). The movements related to house prices are provided of impacts on the activities of labour market. The magnitude of this effect is varied by the gender and type of family.
The aim of this research paper is to understand the different factors in increasing the price of housing within Australia. It evaluates the effects of the housing which is raised the prices within Australia.
The project report examines the positive and negative effects of the rise of house price on economy as well as households of Australia. The positive effects are that the price of house is affected aggregate demand as well as economic activities. Wooldridge (2015) stated that there is an optimistic expectation to the returns on the property investment which is occurred with rise of the price of house. There is an increase into private consumption due to increase of house prices. There is a change into the financial behaviour of the house owners as result of hike in price, homeowners are becoming home purchases. Kohler and Van Der Merwe (2015) noted that there is an increase into property prices which tend to have positive impact on the real GDP. Chappell and Campbell (2018) discussed that within Australia, the real estate is become a key significant investment asset. When the price of property is raised above cost of construction, then it is profitable for construction of new buildings. Apart from the positive effects, there are also negative effects of housing price such as rise into housing price raised the wealth of homeowners but it reduced the affordability of the households those want to purchase of the houses (Gurran & Phibbs, 2016). The buyers of home will require saving pay to higher deposits along with higher mortgage payment. The result is that the consumption drops when there is an increase into price of houses. Increase into house prices affects relative positions of the groups of people. The result is that there is wealth transfer increased the house price which has macroeconomic effects.
With regards to the housing affordability within Australia, Connolly, La Cava and Read (2015) noted that there are urban households of around 542,000 as well as non-urban based households are 308,000. Windsor, La Cava and Hansen (2015) discussed that there are high incidence of the housing stress are found among young as well as lone person. There is higher affordability of problems which are observed among the lower income purchases of home. 14% of lower income households are suffering from housing crisis. Mulley et al., (2016) noted that 36% of the lower income working households are facing housing stress as compared to 28% of the lower income households. van den Nouwelant et al., (2015) argued that when the price of housing is overvalued, then in case of Australia, there are normal house prices are dropped and real prices. When there is burst of housing occurred, then it will harm the economy than collapses of the stock market. There are three arguments which are mentioned to support the research topic such as:
There are some of the factors which affect the rise of housing prices in Australia such as:
Higher income: Australia has lifted its productivity and the country is benefited for the export of commodity because of resources boom, average incomes as well as household wealth which is increased. The households are desired to spend their income to improve quality of housing (Gurran & Phibbs, 2017). Into the coastal areas, there is higher demand of the holiday homes. When there is limitation into supply responses, then there is an increase into demand which leads to the higher prices.
Demographics: Australia has stronger population growth for their economy. Higher rate of immigration is added to demand for the housing, as the immigrants are disproportionately young adults. Over the time, there is a grown into the population of Australia. The average size of household is declined due to increase of single person in addition to parent households. From one year to other, there is a decline of average number of people per household from 2.7 to 2.5 (Minnery, 2017). The growth of entire population implied to increase in demand for the housing which is major factor for the housing price within Australia. Change into the economic roles reinforced the factors of demographic with regards to the housing demand within Australia.
Low interest rate: There is a decline into the standard home loan interest rates from mid of year 1990 to early of the year 2002, there is an increase into amount of households which borrow and give ability to bid the price of houses. The reason behind drop of housing loan interest rate is lower of policy of reserve bank interest rate due to establishment of lower inflation environment (Cox, Pavletich, & Hartwich, 2017). Due to increase into competition, there is a reduction of the margin among the policy interest rate as well as loan rate of housing. The housing finance market of Australia is shown as:
Typical term of the mortgage (years) |
Typical loan to value ratio for new mortgages (%) |
Variable rate mortgages (%) |
Owner occupies with the mortgage (%) |
Home equity |
Mortgage market index |
Usage of the mortgages backend securities |
|
Australia |
25 |
80 |
85 |
45 |
Yes |
0.69 |
Extensive |
Table 1: Housing finance markets of Australia
(Source: Bryant & Eves, 2014, pp-309)
Economic climate: The economic conditions within Australia are very good, and the inflation is under control as well as unemployment rate which is fallen. There is average income of people those are raised. There are stronger sentiments among both the investors as well as owner occupies (Baker, Mason, & Bentley, 2015). This particular factor is resulted into increasing the housing prices within Australia both in long as well as short runs.
Wealth effect: The housing is considered as the major store of the wealth. Within Australia, gross housing assets account for half of the total personal wealth. The house owners as well as investors of landlords are feeling wealthier than the rise into prices of the existing houses. It is termed as wealth effect that leads to an increase into consumption expenditures (Chappell & Campbell, 2018). There is an aggregate prices along with economic growth occurred to support rise into the housing prices. This particular factor is contributed to hike of price of the Australian housing.
Further, there is availability of the cost of land, cost of construction as well as achievements to improve the quality of existing housing stock which are taken as the supply side factors affect the price of housing (Baker, Mason, & Bentley, 2015). Reduction into the supply of affordable rental housing, decline into the supply of housing and time takes to release of new land are contributed to the house price inflation within Australia.
Traditionally, the Australians have higher degree of importance towards homeownership that is perceived as important for stability, and creation of wealth. There are five major factors which are taken into considerations that affect the housing price within Australia such as higher income, wealth effect, demographics, economic climate as well as lower interest rate (Brown et al., 2011). A good housing is provided with social environment which is important towards political stability along with prosperity. The conceptual framework of this research study is shows as:
The housing affordability is emerged as issue among the policy makers. Rise into the price of house has positive as well as negative impacts on the economy of Australia. The negative effects are being observed by the policy makers. For longer period of time, the Australian government is encouraged home ownership throughout direct grants of the home buyers. The direct governmental is controlled over lending activities of the financial institutions such as banks which are removed. The independent variables are higher income, wealth effect, demographics, economic climate as well as lower interest rate, meditating variable is governmental policies and dependent variable is factors affects the housing price.
The data are collected from various governmental resources which help the researcher to understand the factors affecting the housing prices within Australia. In order to support collected data, the researcher conducts an interview with governmental bodies, immigrants, as well as the residential individuals. The main findings of this research are to analyse current housing market of Australia for planning the future growth strategies (Stapledon, 2016). The data are also collected from “Real Estate Institute of Australia (REIA) and ABS”, which are related to disposable income and cash rates from Reserve bank of Australia.
The chosen research method of this research study is qualitative research, which are used to access of variables affecting the rise of prices of houses within Australia and rise of price affect the Australian economy. The sources of qualitative research method is interview, documents as well as observation to understand along with explain of the social phenomenon. This particular method is originated from the social sciences which enable the researchers to study of cultural oriented phenomenon (Waite Cassidy, 2017). The qualitative method is included of data sources by means of observation, interview, questionnaires, and documentation along with perception. The qualitative research methods are involved of data collection for personal experiences, interview, and interactions along with observations which are significant towards the personal life.
In this research study, the housing market of Australia is investigated causes as well as effects of the rise of house price from the socio-economic point of view. Yang and Yang (2014) mentioned the factors which are considered for the house price rise within Australia. The short term factors are included of lower interest rates, as well as positive economic climate. The long term factors are demographics as well as increase into wealth effects. It is found that the housing prices are being influenced by restriction policies on management of land. The housing affordability issues are not uniform across Australia (Wood & Ong, 2011). The growing population of Australia is required to house. If people are wanted to live into the cities, then they are required to adapt as well as accept of higher population densities.
Task Name |
Duration |
Resource Names |
Cost |
Factors affecting the housing price in Australia |
30 days |
$4,840.00 |
|
Selection of project topic |
11 days |
$1,800.00 |
|
Decision on topic of interest |
3 days |
Project Manager |
$480.00 |
Allocation of tasks among the team members |
2 days |
Researcher |
$112.00 |
Finalizing the research problem |
2 days |
Project Manager, Researcher |
$432.00 |
Preparation of the research proposal |
3 days |
Analyst, Project Manager |
$720.00 |
Analyze research aim and objectives |
1 day |
Researcher |
$56.00 |
Literature study |
8 days |
$1,024.00 |
|
Review the literature |
2 days |
Consultant, Project Manager |
$480.00 |
Decide on specific project idea |
2 days |
Researcher |
$112.00 |
Planning for research design |
2 days |
Researcher |
$112.00 |
Design solutions to the research problems |
2 days |
Project Manager |
$320.00 |
Methodology |
6 days |
$1,024.00 |
|
Collect the data |
2 days |
Project Manager, Researcher |
$432.00 |
Observations and interview conduct |
2 days |
Analyst, Project Manager |
$480.00 |
Analyze collected data |
2 days |
Researcher |
$112.00 |
Final sign off |
5 days |
$992.00 |
|
Review and edit the chapters |
2 days |
Project Manager, Researcher |
$432.00 |
Finalize the research |
1 day |
Project Manager |
$160.00 |
Proof reading |
1 day |
Project Manager |
$160.00 |
Handling of the thesis for the examinations |
1 day |
Consultant, Project Manager |
$240.00 |
The total budget of the research study is $4840, which consisted of main activities such as selection of the project topic, literature review study, methodology and final sign off the documents.
Conclusion
It is concluded that housing sector plays a key role within economic growth of Australia. The paper is based on analysing the current Australian housing market. It is investigated the factors those are responsible for the hike into house price over the couple of years. There are effects of increase into housing price on the economy of Australia. Within Australia, there are lower interest rates which contributed to increase price of houses. The economic conditions are contributed to increase demand of housing as well as price of housing. From the research report, it is analysed that the long term factors are demographics, wealth effect, higher income and short term factors are low interest rate and economic climate. Rise into the house price has positive as well as negative impacts on the economy as well as households of Australia. The affordability of houses is improved throughout formulation of organizational policy along with execution of high interest rate of the Australian economy. The research also supported that development of housing strategy is helped to reduce the housing stress as well as crisis within Australia. It is seen that the committee is regarded of population growth policies as important issue. Within Australia, lower interest rate is contributed to increase of the price of houses and the economic conditions of Australia are contributed to increase of demand of housing along with its prices.
References
Ashworth, A., & Perera, S. (2015). Cost studies of buildings. Routledge.
Baker, E., Mason, K., & Bentley, R. (2015). Measuring housing affordability: A longitudinal approach. Urban policy and research, 33(3), 275-290.
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.
Brown, R., Brown, R., O’Connor,I., Schwann, G., & Scott,C. (2011). The Other Side of Housing Affordability: The User Cost of Housing in Australia*. Economic Record, 87(279), 558-574.
Bryant, L., & Eves, C. (2014). The link between infrastructure charges and housing affordability in Australia: where is the empirical evidence?. Australian Planner, 51(4), 307-317.
Cesa?Bianchi, A., Cespedes, L. F., & Rebucci, A. (2015). Global liquidity, house prices, and the macroeconomy: Evidence from advanced and emerging economies. Journal of Money, Credit and Banking, 47(S1), 301-335.
Chappell, J., & Campbell, N. (2018). The Housing Gap—Sydney, Australia. In Sustainable Development Research in the Asia-Pacific Region (pp. 293-304). Springer, Cham.
Connolly, E., La Cava, G., & Read, M. (2015, June). Housing prices and entrepreneurship: Evidence for the housing collateral channel in Australia. In Small Business Conditions and Finance, Proceedings of a Conference, Reserve Bank of Australia, Sydney (pp. 115-144).
Cox, W., Pavletich, H., & Hartwich, O. (2017). 13th annual demographia international housing affordability survey: 2017.
Ferrero, A. (2015). House price booms, current account deficits, and low interest rates. Journal of Money, Credit and Banking, 47(S1), 261-293.
Gurran, N., & Phibbs, P. (2016). ‘Boulevard of Broken Dreams’: Planning, Housing Supply and Aff ordability in Urban Australia. Built Environment, 42(1), 55-71.
Gurran, N., & Phibbs, P. (2017). Planning reform for affordable housing supply. Planning News, 43(4), 6.
Knoll, K., Schularick, M., & Steger, T. (2017). No price like home: Global house prices, 1870-2012. American Economic Review, 107(2), 331-53.
Kohler, M., & Van Der Merwe, M. (2015). Long-run trends in housing price growth. Reserve Bank Bulletin, 21-30.
Minnery, J. (2017). Politics, Planning and Housing Supply in Australia, England and Hong Kong.
Mulley, C., Ma, L., Clifton, G., Yen, B., & Burke, M. (2016). Residential property value impacts of proximity to transport infrastructure: An investigation of bus rapid transit and heavy rail networks in Brisbane, Australia. Journal of Transport Geography, 54, 41-52.
Stapledon, N. (2016). The Inexorable Rise in House Prices in Australia since 1970: Unique or Not?. Australian Economic Review, 49(3), 317-327.
Thomas, M., & Hall, A. (2016). Housing affordability in Australia. Parliamentary Library Briefing.
van den Nouwelant, R., Davison, G., Gurran, N., Pinnegar, S., & Randolph, B. (2015). Delivering affordable housing through the planning system in urban renewal contexts: converging government roles in Queensland, South Australia and New South Wales. Australian Planner, 52(2), 77-89.
Waite Cassidy, A. (2017). How Does Mandatory Energy Efficiency Disclosure Affect Housing Prices?. SSRN Electronic Journal. 5(2), 2-75.
Windsor, C., La Cava, G., & Hansen, J. (2015). Home price beliefs: Evidence from Australia. Journal of Housing Economics, 29, 41-58.
Wood, G., & Ong, R. (2011). Factors Shaping the Dynamics of Housing Affordability in Australia 2001–06. Housing Studies, 26(7-8), 1105-1127.
Wood, G., Ong, R., & Cigdem, M. (2015). Factors shaping the dynamics of housing affordability in Australia 2001-11. AHURI Final Report, (244), 1-57.
Wooldridge, J. M. (2015). Introductory econometrics: A modern approach. Nelson Education.
Yang, J., & Yang, Z. (2014). Critical factors affecting the implementation of sustainable housing in Australia. Journal Of Housing And The Built Environment, 30(2), 275-292.
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