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Article | Demand and Supply of Home in Australia - ECON 3008

   

Added on  2020-03-13

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DEMAND AND SUPPLY OF HOMES IN AUSTRALIA 1DEMAND AND SUPPLY OF HOMES IN AUSTRALIABy (Name)Name of the class (course)The Course instructor (Professor)The InstitutionThe City and State locationThe Date

DEMAND AND SUPPLY OF HOMES IN AUSTRALIA 2IntroductionThe article “Housing affordability: Blame supply for high prices, not tax breaks, says former banker” by Alicia Barry on 8th April 2017 talks about imbalances in demand and supply being encountered in Australia’s housing sector. The prices of homes have increased significantly especially in two biggest cities, that is, Melbourne and Sydney. According to the chairman of building firm Fletcher Group, Sir Ralph Norris, the surging demand has contributed to higher prices of homes in Australia’s major cities. A significant population increase has amplified the demand for homes. While the demand for homes is on the increase, there has been a shortfall in supply to put the rising demand in check. Sir Ralph believes that lack of sufficient appropriate infrastructures and issues arising from land release are impeding the provision of homes. Moreover, government tax policies such as negative gearing are also contributing to the rising prices of houses[ CITATION Ali17 \l 1033 ].The crisis in Australia’s housing sector is not only an issue of concern to the Australians but also the government. It is clear that most Australians especially the low and mid-income groups are having difficulties in securing affordable housing units. One of the senior governmentpolicy makers, also the governor of Reserve Bank, Dr. Philip Lowe, has also issued a warning that the current crisis in Australia’s housing industry will be detrimental to the entire economy. Economic AnalysisDemand for HomesAustralia is encountering a high demand for dwelling units. The rising demand for housing units in this country results from non-price factors. Foremost, cities like Melbourne and Sydney are encountering rapid population increase as individuals migrate to the towns in search

DEMAND AND SUPPLY OF HOMES IN AUSTRALIA 3of better opportunities. As the population increases, the demand for homes also rises[ CITATION Gur13 \p 384 \l 1033 ]. In the past one decade, the cost of borrowing for homes has declined substantially, and also there has been increased as access to credit. These scenarios together with an increase in the incomes of Australians have helped to amplify the demand for accommodationunits. Furthermore, government policies such as negative gearing schemes and tax concessions have contributed to the crisis in the housing sector. These plans give the investors an advantage over the owner-occupiers in the housing market[ CITATION BRO11 \p 562 \l 1033 ]. The investors usually buy and retain houses in anticipation of profits on resale. Graph 1: Increase in Demand for homesPriceNumber of houses The increase in demand for dwellings in Australia’s housing market is demonstrated by the shift in the demand curve from D0 to D1. As a result, the number of housing units required has increased from Q to Q1, and the price increased from P to P1. This occurrence has led to housing affordability crisis particularly among the low incomes earners. The Supply of HomesSP1PQ1QD1D0

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