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Introduction

In today's environment its just a dream to build a house of choice and even though the prices are also high which transform the mind of people to buy a home particularly in Sydney and Melbourne (Aalbers, 2016). Moreover, various investors are coming in to Australia to invest a good amount to build a house and to compete with the buyers. Hence, Sydney and Melbourne are considered as the most expensive and high priced cities. In this assignment, reasons will be discussed for housing market Boom and Bust, How prices of house can be reduced.

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Task

Why Prices Are So High In Sydney And Melbourne

In a country it is required to consider supply or demand of several products and services to manage its prices easily. Sydney and Melbourne are two capital cities in UK in which prices of houses are calculated as high rate due to various reasons (Aron and et. al., 2012). One major reason of this booming is that there is not enough houses are being built but demand of purchasing is very high. In this case some investors wants to competing with these economic values to maximise prices and demands of these houses easily.

Demand – Basically, in Sydney and Melbourne the demand for houses is huge but prices of apartment or houses are so high. Because in these two cities not enough houses are build which create a situation of not be able to provide (Supply) of houses in proper way. Sometimes, income of people also increases the demand of house as well.

Supply – Normally, supply should always be high but in case of houses in Sydney and Melbourne it is having many downturns as because not enough houses are build which created the situation of increase in demand. Therefore many investors from across the globe are coming in to invest high amount on houses and for same they keep the prices high, that also manipulate people not to buy apartment. Hence, in such situation the demand remain same for the houses.

Interest Rate – In Sydney and Melbourne, various banks are there who provide home loans at correct rates. Generally, paying cost of mortgage is somewhere mainly disturbed with interest rates (Crowe and et. al., 2013). Even though, many landlords are there who is also having an different variable that leads to have an increase cost in interest rates.

Government Policies – Government policy has an great impact on the house prices. Government is that who can take various and different steps to have control over the prices in market. Normally government of Australia can take some steps that help to modify the prices of houses so that more homes can be build. Hence, they can increase the interest rates and can also raise the stamp duty etc. In today's scenario step taken by UK government is be like:

  • Minimisation in VAT and motivate individuals to purchase house
  • Government is saying forcing to decline the interest rate to Banks.

Moreover, environment of houses in Sydney and Melbourne is not stable which created a problem for many people to buy house although mainly the increase in prices for the same that has impacted to increase demand of houses. In this case, many policies should be bought and housing scenario has to be taken into under for improving this criteria.

Suggest The Ways How Prices Can Be Reduced

Many suggestion should be there which can help to reduce the prices of houses in right context in scenario of Sydney and Melbourne not enough houses are there which increase the demand of house and prices too in great manner. Reduction in prices can make people to buy the houses and if interest rate also goes down then it can also manipulate individuals to purchase land and house. According to David Scutt, the prices for home has fallen down to .5% in somewhere March Quarter 2018. Moreover, Sydney and Melbourne is such which has an higher prices then national average, even though the much weakness also reflect the south in with these two cities.

Hence, there are ways which can help Australian Housing prices can go down and demand and supply both can be managed in effective way (Duranton, Henderson and Strange, 2015). Firstly, more and more investor can come in to Australia to invest huge amount for build number of houses which can help in balancing the supply and demand in right context. This can also lead to increase the chances of employment for many of the people as well. Secondly, Prices are that which needs to be reduced in better way which can bring hope in people to buy their house too. If the banks are providing loans to people at lower rates then individuals can buy apartment or house in proper way too. Thirdly, Prices will not affect much if people is looking for the offers on house as who is giving discount etc. The cities like Sydney and Melbourne is that where finding an house at lower cost is quite difficult. Even though, if the government make policy of reducing the VAT then the prices would also come down and people can look forward to buy an house.

Normally these suggestion in reduction of housing prices can be helpful. According to research, the house prices in Australia is showing some signs of cooling as in the month of December, price merely fall by .3% and its being expected to remain it same for the whole year.

Basically in the year, 2017 the rate was noticed as around 4.2.% in comparison of approx. 5.8% in 2016 and near by 9.2 in year 2015 (Haslam McKenzie and Rowley, 2013). Evan though declining in prices is helping people of Sydney and Melbourne to buy the houses in effective way.

Reasons How A People Can Afford To Buy House In Expensive Market

In Cities like Sydney and Melbourne its hard to buy houses at reasonable prices as because there are no build houses which is creating issues and also increasing the demand of houses and supply is not there as demand is affecting (Montgomerie and Büdenbender, 2015). Moreover, it becomes hard for the people to buy the house at such increased prices and it also affect the buying power of people, therefore various reasons is affecting people to purchase and to afford such expensive house. Some of the ways through which a house can be purchased as: Firstly, it is required to increase the qualify income in better way as according to the Equal opportunity act Amendments of 1796, is such who borrow and receives from public assistance programs which merely qualify the loan. This is being considered to increase in total income. Secondly, some mortgages are there which forgive the guidelines when it is about income. Those people who has an lower income has an option as Mac's Home possible program. However, borrower should have an yearly income which is equivalent or less them median revenue and income. Thirdly, People always has an option in calling up in a co-borrower, as having an extra income make people to apply for the large mortgage. Fourthly, Bringing strength to the application is such which can provide a surprise that income is less important and has underwriting criteria. For instance, tell some of the money lender that, in a particular year business makes around $ 1million but having an approx. 500 Score with only few percent. Even though making an better application which does include the compensating factor and using low debt and having an proof of saving etc (Reinhart and Rogoff, 2013). Generally, people who has an low to moderate incomes which mortgages every time in right context too. Although its being done when the person is having an better credit and also good payment down size with money in bank too. Fifthly, People also goes with this as sub-prime mortgage loan is such which has an higher interest rates then having an prime-mortgage counterparts in better way too. Normally, higher rates are that which also place an risk of loan which has an default Sub-prime mortgages who has an risk for the customer for having an poor credit as well (Ngai and Tenreyro, 2014). However, there is an benefit for the people as those individual person with having an bad credit requires not to wait for the long period to own a home in great way.

Conclusion

From the above essay, it can be said that in cities like Sydney and Melbourne its quite an difficult job to buy an house as because the prices of houses are high and not enough amount of homes are build there-out. Even though the policy for houses are not accurate which needs to be build again and required to recreate it in better way so that housing market pricing can also be done in better way as well. Normally ways are also suggested to reduce or decline the prices of houses in great manner which resulted in buying of houses. Even though in such criteria people are such who still manage to buy the houses in proper way.

References

  • Aalbers, M.B., 2016. The financialization of home and the mortgage market crisis. InThe Financialization of Housing(pp. 40-63). Routledge.
  • Aron, J., and et. al., 2012. Credit, housing collateral, and consumption: Evidence from Japan, the UK, and the US.Review of Income and Wealth. 58(3). pp.397-423.
  • Crowe, C., and et. al., 2013. How to deal with real estate booms: Lessons from country experiences.Journal of Financial Stability. 9(3). pp.300-319.
  • Duranton, G., Henderson, V. and Strange, W. eds., 2015.Handbook of regional and urban economics. Elsevier.

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