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Research Project Starbucks Assignment

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BUSINESS ECONOMICS

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1.0 Introduction

 

Housing in the two capital cities Melbourne and Sydney have been found extremely cost-effective. It has been seen that houses are being sold at $1.2 million and apartments are at $800000 and above. Following study aims to find the reasons with evidence of high cost of houses in Melbourne as well as Sydney. This study will also suggest and provide evidence for the ways to reduce prices and also will suggest affordability for housing with evidence.

2.0 Reasons and evidence of high price of houses in Sydney and Melbourne

 

Popular belief of contrary has found that there are more than required houses as well as apartments in Australia. It has been seen that maximum number of dwellings has been built in the capital cities of Australia, Melbourne, and Sydney. However, it has been seen that there have been found neither surplus nor shortage of houses in Sydney. Regions with maximum over-supply have been found in Melbourne city (smh.com.au, 2018).

Reasons of high price of houses and apartments in Melbourne and Sydney has been found to be the over-supply of housing and lack of relativity between shortage and surplus of dwellings. The root of high pricing for houses in Australia has been encountered from the period of 90's. At that time growth in population has been found to be higher than the supply of dwellings. It has been known that customer prices and the asset prices are not necessarily same. Growth in per capita income returns on rent and demographics have been found to be the fundamental deciders of the prices of assets. For Sydney as well as Melbourne, it has been seen that the supply of strong buildings has been met extremely rare in the given timeframe.

It has been seen that the policymakers are in the needs of placing higher emphasis on the potential drivers. The respective potential drivers have been found to be responsible for the growth of prices for house as well as housing affordability. This is because the demand ranges have been found with the effects on taxation for arrangements of houses and rates of interest for housing. Demand for housing in Sydney, as well as Melbourne, has been found to depend on the change of demography as well as on the growth of population.

It can be said the types of buildings in Melbourne and Sydney are comparatively luxurious. Further, it has also been seen that the cost of living and lifestyles standards of the people of capital cities of Australia are comparatively higher on a global basis. This literally refers that expenses on housing as well as living are higher. Changes in demography of Australia have led to built dwellings more than the actual requirement.

Irrespective of the demand and price relation of commodities, it has been found that the price-demand relationship for assets is different (Yang and Mallick, 2014). Price-demand relationship for assets refers that prices for houses as well as properties are independent of demand. It has been said that asset prices are dependent on standards of life of the respective regions.

3.0 Suggestions along with evidence to reduce prices for house in Sydney and Melbourne

 

Being a developed country, it has been seen that asset prices of Australia are relatively high. Restricted supply along with demand has been pushed up by the results derived from the prices of housing in Sydney and Melbourne. Most of the issues related to the pricing of assets have been found to be appearing due to the various policies of the regulatory government.

As per the statements of Tripathi et al. (2017), it can be said that the issues related to the high pricing of houses and apartments have major adverse effects on the young Australians. This is because the young people of Australia have been found to be stepping on the ladder of career and are unable to afford such houses of high price.

Melbourne and Sydney have shown that the issues regarding the high prices of housing can be mitigated by controlling the overall supply of housing. In the areas of the inner cities of the respective capital cities, the land needs to be developed in the free market. This may lead the respective government to low-down the prices for housing properties. It has been seen in the aforementioned capital cities that there is maximum number of cottages along with one-story building in the inner cities. However, the cottages and the one-story buildings should be on the outskirts of Melbourne and Sydney. This may be helpful for reducing the prices of houses in those capital cities.

According to the statements of Salem and Rahman (2016), it can be said that by removing the negative gear reduction of costs may lead to decrease the demand from the investors of dwellings. However, it has also been found that the effect of this strategy would be comparatively minimal. The government of the regulatory board has to come up with divisive issues of housing affordability. It can be said that for the newer buyers of assets needs to be provided subsidy from the government. As per the statements of Guerrero et al. (2015), social housing facilities have been found to be required for reducing the costs related to housing in Australia.

According to the statement of Harwit (2016), changes in the policies of government may also be helpful for the younger Australians to become able for housing affordability. It has been found that if the costs of commodities can be controlled by the regulatory board, prices of housing will also be reduced. Increasing rate of income may also help the individuals to cope up with the relative issues of housing. Regulatory control over the growth of population can also help to reduce the costs of affordability of housing. It has been seen that housing in the two capital cities Melbourne and Sydney has been found highly cost-effective due to excessive demands of investors for housing. It has been seen that houses are being sold at $1.2 million and apartments are at $800000 and above for both the Melbourne as well as Sydney.

4.0 Housing affordability in Sydney and Melbourne suggestions for a young professional along with evidence

 

Housing affordability basically reflects the relativity of household incomes with housing expenditure. Expenditure of housing consists of rents, prices, and payments of mortgages (Rubinstein, 2017). It has been found that affordability of housing in the capital cities like Melbourne as well as Sydney is comparatively high for the younger individuals of Australia, on a worldwide basis. It can be seen from the time of earlier period of 1980's in Australia, affordability of housing has been declined broadly for the young Australians. Ratio of prices of dwelling to the income of the respective individuals has shown the increase of 78% from 1980 to 2015 (aph.gov.au, 2018). The following graph of the ratio of dwelling price to incomes of the younger people shows the wide ratio of Australia from the earlier period of 1970 to 2012.

 

It can be said that the young professionals can be able to afford to house with the help of private rental market of Australia. The respective market pushes the people with lower income won houses by providing disbursement of loans for property. In context of housing affordability for the younger earners, continuously increasing renters of Australia have been provided reduction of housing stresses by the market for private rentals. As per the statements of Leamer and Stern (2017), respective rental market has suggested the low-income houses specifically for the younger earners.

It can be said that the state, territory and the federal government can offer social rental houses for those young professionals. However, it has also been seen that the social housing or social rental housing stock has not been increased to comprehend with the demands of housing affordability for a longer period of time. The respective government has to arrange a complete review regarding the homelessness programs and policies to mitigate the issues of housing affordability. A survey can be undertaken from the initiative of the regulatory government on the basis of homelessness as well as housing affordability.

The issues of the younger individuals for housing affordability can be decreased by reducing the over-supply of housing. According to the statements of Yang and Mallick (2014), supply for proper housing affordability for all Australians can be increased with the help of financial instruments, such as low-income loans for assets.

5.0 Conclusion

 

This study has been found to be suggested and provided evidence for the ways to reduce prices and also will suggest affordability for housing with evidence. The respective study aims to find the reasons with evidence of high cost of houses in Melbourne as well as Sydney. Here, in the study possibilities and risks for the younger people in affordability of housing has been discussed.

References

aph.gov.au (2018), Housing Affordability for Young People in Australia. Viewed at: 10/01/2018 https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook45p/HousingAffordability

Guerrero, M., Cunningham, J.A. and Urbano, D., 2015. Economic impact of entrepreneurial universities’ activities: An exploratory study of the United Kingdom. Research Policy44(3), pp.748-764.

Harwit, E., 2016. China's Automobile Industry: Policies, Problems and Prospects: Policies, Problems and Prospects. Abingdon: Routledge.

Hudec, O., 2015. Visegrad Countries and Regions: Innovation Performance and Efficiency. Quality Innovation Prosperity= Kvalita Inovacia Prosperita19(2), p.55.

Leamer, E.E. and Stern, R.M., 2017. Quantitative international economics. UK: Routledge.

Rubinstein, A., 2017. Comments on economic models, economics, and economists: Remarks on economics rules by Dani Rodrik. Journal of Economic Literature55(1), pp.162-72.

Salem, S.M.A. and Rahman, N.A.A., 2016. The effect of bank-specific factors and unstable macroeconomic environment on bank efficiency: evidence from FCC. International Journal of Advanced and Applied Sciences3(9), pp.97-102.

sbs.com.au (2018), Reduction of Housing Prices in Australia. Available at: https://www.sbs.com.au/news/the-feed/how-to-lower-house-prices-and-why-it-will-never-happen [Accessed on 12 January 2018]

smh.com.au (2018), Reasons of High Price in Housing in Sydney and Melbourne. Viewed at: 10/01/2018 https://www.smh.com.au/opinion/australia-has-more-than-enough-houses-so-why-are-prices-so-high-20171119-gzoadj.html

Tripathi, P., Tripathi, V. and Koutsoyiannis, A., 2017. Modern micro economics. Asian Journal of Multidimensional Research (AJMR)6(8), pp.28-31.

Yang, Y. and Mallick, S., 2014. Explaining cross-country differences in exporting performance: The role of country-level macroeconomic environment. International Business Review23(1), pp.246-259.

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