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Executive Summary to Property Market Cycles Report

This report deals with the analysis of the property market within the domain of Australia. Efficient Market Hypothesis (EMH) highly relates to the property along with the theory of property cycle as it allows the buyers to get the required assets from the market. However, there are certain factors such as demand and supply along with labour risk, credit risk and others that seem to be affecting the market adversely. Additionally, the economic indicators such as the rate of GDP alongside the rate of employment and inflation are also likely to affect the property market with negative growth. This further affects the demand and supply curve within the domain. Hence, choosing a populated area for the development of the property market can be useful in improving the rate of performance and help the market to gain the desired profitability.

Table of Contents

Introduction.

Findings and analysis.

Application of efficient market theory to the property market

Understanding the property market through different economic indicators.

Analysis of demand and supply.

Conclusion.

Reference list

Introduction to Property Market Cycles

Property cycle intends to analyse the sequence of events that takes place within a market economy. The period of property is likely to affect the property market within the domain. This study will reflect on the analysis of the impact of efficient market theory on the different stages of the property cycle. Additionally, the research will also be focusing on the understanding of the property market through various indicators of the economy alongside analysis of the risk within it. Furthermore, factors that tend to influence the demand and supply aspects within a site of property development will also be analysed in this study.

Findings and Analysis of Property Market Cycles

Application of Efficient Market Theory to The Property Market

Property market also is known as a resident, or commercial market involves the buying alongside selling of building and land. As per the analysis of Fæhn et al. (2017), the property market relates to the real state of economics within a nation. However, the property that is not being affixed is considered to be personal property most of the purchasing that is being executed within the mentioned market. Market efficiency, on the other hand, reflects the prices that are being used within the market. As per the theory of market efficiency, it can be analysed that the relevant information within a market is reflected through its prices (Gölgeci, Karakas, & Tatoglu, 2019). Efficient Market Hypothesis (EMH) trends to reflect fair trades. The stocks that are being traded within a market must be based on a fair value so that the investors and buyers within the market can take advantage and buy the necessary equipment. It is also useful for inflated prices through the application of this theory. In this respect, EMH seems to be suitable for the property market.

It is because, through the application of EHM within the property market, the market will be able to trade with a fair and equal cost to all the buyers. Besides, as opined by Jacobson et al. (2018), EMH also provides the facility of selling stocks based on the prices of inflation. In this respect, it can also be stated that prices sold based on the inflation rate imply unequal equity within the market. Henceforth, through the application of the EMH within the market, property market becomes impossible to become outdated within the market. Through the use of EMH, the property market possesses the change of functioning with proper ease. It also helps in providing the buyers and investor with the real value that can benefit their operations and keep the value of the property market intact.

Property cycle, on the other hand, reflects certain stages involved within the market condition. In the opinion of Khuntia & Pattanayak (2018), the requirements of the property market include free market so that the market can function without any particular interference. Henceforth it supports EMH as it involves no intervention from the other aspects of the society. However, the stages of the property cycle reflect boom, slow down, slump and recovery (Guo, Jiang & Wong, 2017). From the mentioned stages, the property cycle reflects a market condition that intends to possess more buyers than the sellers. It also represents a profound crisis of affordability alongside, an abundance of trades people, high confidence and others. Through these aspects, it can be reflected that the model tends to provide proper access to the buyers and help them get the desired goods and services from the market. Hence, the property market seems to be supporting the aspects of EMH.

Understanding the Property Market Through Different Economic Indicators

Economic indicators are useful within any types of the market, whether it be a property market or others. As per the opinion of Hong, Li & Xu (2019), indicators of the economy helps in analysing the current economic constitution within the market. It also helps in analysing the reasons for the downfall of the market condition further contributes to the implementation of a proper strategy that can assist the market is getting back its correct position. GDP is one of the most prevailing economic indicators that help in analysing the market condition effectively.

As of 2018, the GDP rate of growth in Australia reflected 3.2% (The World Bank, 2020). However, as of the first quarter of 2019, the price of GDP reflected by 2.2% that was much lower as compared to 2018. However, the fourth quarter of 2018 reflected the rate to be 1.8% (The World Bank, 2020). Further moving to the first quarter of 2020, the percentage of GDP again seems to be growing to 2.2% while in the third quarter it seems to be 1.4% depicting a decreased rate as compared to the first quarter of 2020 (Trading Economics, 2020).

Conversely, it can also be noticed that the rate of inflation as of 2018, the price of increase of Australia resulted in 1.93% while the year 2019 reflects a rate of 1.61% that is low as compared to the previous year (Trading Economics, 2020). Moving to the next year, that is 2020, the rate shows a further downward curve depicting the value of 1.43% (Plecher, 2020). As per the previous standard, that is the rate of GDP growth; the inflation rate is also depicting a downward curve within the markets of Australia.

Alternatively, due to the above-mentioned indicators, the rate of employment is also likely to be effected within the domain. As of 2018, the price of work within the area of Australia reflected 62.5% (Trading Economics, 2020). The rate of 2018 was low as compared to the standard of 2019 that depicted a value of 62.6%. However, as of 2020, the cost seems to be decreasing, reflecting a figure of 58.4% (Parliament of Australia, 2020). Following the trend of the previous two indicators, the current one also depicts a low growth within the economy.

The above mentioned three indicators of the economy show a downward curve. Low rate of GDP indicates an economic recession within the market. As per the opinion of Ayodele & Maxwell (2017), the flat rate in terms of GDP implies poor performance within the domain. Based on this analysis, it can be stated that the property market within Australia is facing low growth due to the poor performance within the market. Poor performance within the market reflects poor service condition that is further reflecting by the inflation rate. As per the expectation, the price of inflation is also low, that implies poor condition of the services within the market. This means the fact that the property market is having low demands of the goods and services, thus decreasing the performance rate of the economical condition within the domain. However, the flat rate of inflation triggers the unemployment rate to increase further resulting in a low employment rate. It is because of the low price of wages results from a low inflation rate, and thus the employment comes at a stake. Considering this aspect, the employment rate also seems to below. Hence, it denotes that the property market within the area is facing a labour shortage, further affecting the service and performance rate. Henceforth, all the indicators are related to each other. As a result of this, the low price of one sign affects the others further affecting the economic condition.

Analysis of Demand and Supply

A proper property market can be developed in Doncaster road as it comprised of the commercial building sector. Demand and supply curve intends to reflect the current condition of a market. As per Younas & Mehmood (2018), price within a community is defined by the demand and supply aspects that are being possessed by that particular commodity.

Based on the above figure, it can be analysed that the shift in the demand curve that is the increase in the demand within the market also shifts the equilibrium within the market. It results in high prices within the community. Similarly, the model also depicts the shift in the supply curve that is the increase in the supply of the commodity that is being demanded by the customers highly also increases the price of that particular commodity.

Considering the model of demand and supply, it can also be depicted that both the aspects reflecting the demand and supply tend to affect the price of the commodity within a market. Hence, it can be said that amount is highly influenced by the high demand and supply within the market. Conversely, as illustrated by Puah et al. (2016), top customers within a market are likely to influence the demand of a commodity in a positive way further creating a positive influence on the supply and increasing the price. The chosen site for the development of the market seems to be highly crowded. As a result of this, it will help in bringing more customers within the market. However, from the previous analysis, it can be stated that high customers are likely to create high demand, further increasing the price and supply. This also results in increased profitability within the market.

Through proper population ration and increase in demand and supply along with the price is likely to bring the property market high profitability that further enhances the performance level within the domain. It also assists in the abundance of the stocks so that the requirements of the buyers can be met that further reflects the aspects of EMH. Hence, setting up the market in the mentioned area will be useful in building the performance and the help in training the desired profitability while creating proper access to the resources to the customers within the market.

Risk Analysis of The Market

The risk seems to be firing an integral part within the market of property, a per the analysis of Zhu et al. (2018), practical evaluation of the risk helps in the proper identification that further helps in the management of the risk. Often uncertainty creates barriers in the accomplishment of the targeted goals. However, based on the above indicators of economy presented within the property market, it can be analysed that there is a particular risk related to the development of a property market.

Seriousness

Likelihood

 

Low

Medium

High

Low

Replacement cost risk

Unavailability of the services

Low service

Medium

Idiosyncratic Risk

Labour shortage

Low demand

High

Structural risk

Credit risk

Poor performance

Table 1: Risk analysis within the property market

(Source: Influenced by Hong, Li & Xu, 2019)

Based on the above table, it can be analysed that there is a particular risk that can affect the property market effectively. It includes the risk of credit, poor performance, structure, labour shortage and many others. The risk seems to be prevailing due to the downfall of the economic indicators mentioned above.

Conclusion on Property Market Cycles Report

From the above discussion, it can be concluded that the property cycle alongside EMH plays a significant role in the evaluation of the property market. Besides, it is also likely to affect the demand and supply aspects within the market, further contributing to the economic demographic and emotional factors. Moreover, the rate of GDP is directly linked to the inflation rate as it decreases the performance rate within the market. It also affects the prices of the commodity, further affecting the demand and supply within the market. It further links to the standard of employment as low GDP and inflation reflect low wages of the labour also decreasing the employment rate. However, demand and supply seem to be creating a significant impact on the prices of the commodity. Risk of credit along with structural, labour and others can also affect the property market. Hence, high supply and demand also increase the prices further maintaining proper performance levels and profitability within the markets of property.

Reference List for Property Market Cycles Report

Ayodele, A. J., & Maxwell, O. O. (2017). Test of the semi-strong efficiency theory in the Nigerian stock market: An empirical analysis. Journal of Finance and Accounting, 5(4), 139. Retrieved on 25 May 2020, from: http://article.sciencepg.net/pdf/10.11648.j.jfa.20170504.13.pdf

Fæhn, T., Hagem, C., Lindholt, L., Mæland, S., & Rosendahl, K. E. (2017). Climate policies in a fossil fuel producing country–demand versus supply side policies. The Energy Journal, 38(1). Retrieved on 25 May 2020, from: https://www.iaee.org/en/publications/download-instant.aspx?id=2853

Gölgeci, I., Karakas, F., & Tatoglu, E. (2019). Understanding demand and supply paradoxes and their role in business-to-business firms. Industrial Marketing Management, 76, 169-180. Retrieved on 25 May 2020, from: https://fardapaper.ir/mohavaha/uploads/2019/03/Fardapaper-Understanding-demand-and-supply-paradoxes-and-their-role-in-business-to-business-firms.pdf

Guo, X., Jiang, X., & Wong, W. K. (2017). Stochastic dominance and omega ratio: Measures to examine market efficiency, arbitrage opportunity, and anomaly. Economies, 5(4), 38. Retrieved on 25 May 2020, from: https://www.mdpi.com/2227-7099/5/4/38/pdf

Hong, H., Li, F. W., & Xu, J. (2019). Climate risks and market efficiency. Journal of Econometrics, 208(1), 265-281. Retrieved on 25 May 2020, from: https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=6965&context=lkcsb_research

Jacobson, M. Z., Delucchi, M. A., Cameron, M. A., & Mathiesen, B. V. (2018). Matching demand with supply at low cost in 139 countries among 20 world regions with 100% intermittent wind, water, and sunlight (WWS) for all purposes. Renewable Energy, 123, 236-248. Retrieved on 25 May 2020, from: https://web.stanford.edu/group/efmh/jacobson/Articles/I/CombiningRenew/100PercentPaperAbstracts.pdf

Khuntia, S., & Pattanayak, J. K. (2018). Adaptive market hypothesis and evolving predictability of bitcoin. Economics Letters, 167, 26-28. Retrieved on 25 May 2020,

Parliament of Australia, (2020). Employment in Australia, Parliament of Australia. Retrieved on 25 May 2020, from: https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook45p/EmploymentAustralia

Plecher, H., (2020). Inflation rate in Australia 2024, Statista. Retrieved on 25 May 2020, from: https://www.statista.com/statistics/271845/inflation-rate-in-australia/

Puah, C. H., Kuek, T. H., Arip, M. A., & Wong, S. S. L. (2016). Forecasting property market dynamics: Insights from the property cycle indicator. International Information Institute (Tokyo). Information, 19(6B), 2225. Retrieved on 25 May 2020,

The World Bank, (2020). GDP growth (annual %) – Australia, The World Bank. Retrieved on 25 May 2020, from: https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=AU

Trading Economics, (2020). Australia Employment Rate, Trading Economics. Retrieved on 25 May 2020, from: https://tradingeconomics.com/australia/employment-rate#:~:text=Looking%20forward%2C%20we%20estimate%20Employment,according%20to%20our%20econometric%20models.

Trading Economics, (2020). Australia GDP Annual Growth Rate, Trading Economics. Retrieved on 25 May 2020, from: https://tradingeconomics.com/australia/gdp-growth-annual

Trading Economics, (2020). Australia Inflation Rate, Trading Economics. Retrieved on 25 May 2020, from: https://tradingeconomics.com/australia/inflation-cpi

Younas, M. Z., & Mehmood, R. (2018). Examining the Efficiency of American Stock Exchange NASDAQ: An empirical analysis of the Market Efficiency Hypothesis. Bulletin of Business and Economics (BBE), 7(3), 132-137. Retrieved on 25 May 2020,

Zhu, Y., Wang, J., Zhang, F., Gao, S., Wang, A., Fang, W., & Jin, J. (2018). Zwitterionic nanohydrogel grafted PVDF membranes with comprehensive antifouling property and superior cycle stability for oil‐in‐water emulsion separation. Advanced Functional Materials, 28(40), 1804121. Retrieved on 25 May 2020, 

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