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One of the core contributors to the domestic economy of Australia is residential property market. It was observed that regulatory intervention in the financial markets had deep and serious consequence on the residential property market. It was expected that the low interest rates and the low employment would lead to increase in the prices of property. But it was seen that the low availability of credit has more than offset the demand (Ahmad, 2020). This resulted in fall in the prices of property rather than fuel in the prices of property in many capital cities of Australia. Moreover, the strong growth in the population is continuing to underpin the demand.
The onerous lending conditions in Australia has led to many potential investors out of the market. The people accounting for about 20 per cent of the mortgage loans are the first home buyers. The first home buyers are continuing to buy residential property. In 2018, more than 1,10,000 first time home buyers came in the market. Due to the worse conditions of lending, decline in the property prices and looming uncertainty related to the economy have led to lose in the potential investors (Kuttner and Shim, 2016). It was seen that despite the lowering the issue of assessment of serviceability of mortgage by lenders, the problem of fall in the property prices existed. This was due to the more rigorous judgement of the income and expenses to provide loan facility. This had a profound impact on the growth in the credit as well as the rate of price growth of property. Thus, the affordability constraints persisted in Hobart after the strong rise over the last four years. The affordability constraint led to slow down in the growth of price in Hobart. The markets of Perth and Darwin is also forecasted to remain weak in short term (Pawson et al., 2020).
The year 2020 presents a much more positive outlook for the residential markets in Australia as compared to the uncertain year 2019 (Nguyen and Wang, 2019). The strong growth in prices has came back in the capital cities of Sydney and Melbourne. It is forecasted that this strong price growth would also spread to more affordable markets such as Brisbane and Perth. These two would lead the countries in the terms of effective growth in rents in the office sector (Nguyen and Wang, 2019). In the major capitals of Australia, the apartment supply cycles are past their peak. Also, the rates of vacancy are well controlled. It is expected that if the lending facilities starts to rise and the cost of debt becomes low then the investors would gradually come back. This forecast would also motivate and encourage the developers to start the marketing of the larger plans of projects (Rajapakse and Senarath, 2019). The Housing Outlook of Australia forecasts that the vacancy rates would tighten rapidly in Melbourne. This would be due to the swelling of modest undersupply of dwellings. This would further lead to recovery in the growth of price in the next cycle. However, the lower availability of credit would continue to subdue the rate of growth in prices. It was projected that the total rise in the house prices would be 5 per cent over the next three years (Nguyen and Wang, 2019).
It is forecasted that the future would be bright. As the owner occupiers are enticed back, it is expected that in the largest market of Melbourne and Sydney, the prices of property would be stabilised (Dive, 2020). The owner occupiers would be attracted to this market as the new service ability threshold would encourage them. Moreover, the migration would benefit the economy. The other number of factors that led to a more optimistic outlook are: employment has started to grow, job advertisements began to recover, the consumer and business confidence have picked up. The Organisation for Economic Co-operation and Development (OECD) expects that the economy of Australia would perform more better than other economies in the coming years. The strongest forecast was seen for Brisbane. In Brisbane, it was noted that there was a modest increase in the prices for about a decade and that left the market relatively affordable. With the dream of the people of home ownership which is as strong as it has ever been, it is expected that the demand of the residential property market would continue to emerge.
Ahmad, A.R., 2020. The Issues of Residential House Systems and How to Make It More Sustainable Systems. Academic Journal of Nawroz University, 9(2), pp.232-243.
Dive, H., 2020. Gazing into the crystal ball: The outlook for listed property in 2020. Equity, 34(1), p.4.
Kuttner, K.N. and Shim, I., 2016. Can non-interest rate policies stabilize housing markets? Evidence from a panel of 57 economies. Journal of Financial Stability, 26, pp.31-44.
Nguyen, V.H. and Wang, J., 2019. The Australian economy in 2018–2019: convergence in economic activity across Australia. Australian Economic Review, 52(1), pp.5-18.
Pawson, H., Milligan, V. and Yates, J., 2020. Housing Policy in Australia: A Reform Agenda. In Housing Policy in Australia (pp. 339-358). Palgrave Macmillan, Singapore.
Rajapakse, P. and Senarath, S., 2019. Commercial Law Aspects of Residential Mortgage Securitisation in Australia. Springer International Publishing.
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