Victims of Australia's Property Market: An Economic Analysis
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Added on  2023/06/03
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This presentation analyzes the victims of Australia's property market using economic theories and concepts. It covers the impact on renters, singles, owner occupiers, and retirees. The presentation also discusses the increase in demand for rentals, decline in home ownership, and the burden of high land tax on retirees.
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Introduction •Victims in Australia’s property market •Steep property prices in Melbourne and Sydney •Decline in home ownership •Increase in mortgage among young homeowners •Overlooked victims •Market analysis using economic theories and concepts
Renters •Increase demand for rentals •Demand side pressure increases rents (Scutt, 2018) •Only 5.7 percent deemed to be affordable •Dilemma among the renters •Renting means paying mortgage of someone else •Money could be invested to build wealth and security in the property market
Renters •Rental demand curve is DD •Rental supply curve is SS •Initial rent is at R* •With increase in demand, demand curve shift outward to D1 •Increasing pressure on rents (Cowell, 2018) Figure 1: Demand and supply in rental market
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Singles •Difficult situation for singles •Home ownership become tougher •Need at least one assurer to raise loans •Affects housing affordability •Difficulties in spending for maintenance and repair (thenewdaily.com.au, 2018) •Single women leaving the labor force cannot afford
Singles •Demand curve for Singles is DD •Supply Curve is given as SS •Initial equilibrium is at E1 •Lower housing affordability for Singles •Lowers the demand •Shift in demand to D1D1(Baumol & Blinder, 2015) •Downward pressure in housing price Figure 2: Demand and supply in property market
Owner Occupiers •Relatively less problem for owner occupiers •Inflated price of housing •Have to stay long in a single place •Switch to bigger home is expensive •Agent fees, cost of marketing and stamp duty lead to additional cost (thenewdaily.com.au, 2018) •Prefer to spend for renovation
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Retirees •Many pension holder have own house •Bear the burden of high land tax •Tax bill increases with increase in property value •Retirees though have assets but lack cash (thenewdaily.com.au, 2018) •Decline in percentage of men and women living with parents •Demand for houses among retirees reduces because of increasing cost burden
Conclusion •Sharp increase in property prices •Some overlooked victims of property market •Renters ; Higher rent and reduced demand •Singles ; Lower affordability lowers demand for new houses •Owner Occupiers; Face higher cost switching to bigger home •Retirees; Lack of the cash and higher burden of tax cause resentment among them.
References •Baumol, W. J., & Blinder, A. S. (2015).Microeconomics: Principles and policy. Nelson Education. •Cowell, F. (2018).Microeconomics: principles and analysis. Oxford University Press. •Scutt, D. (2018). Here's where housing rents are rising the fastest in Australia. Retrieved from https://www.businessinsider.com.au/australia-rental-rates-cost-of- living-q2-2018-7 •The overlooked victims of Australia's runaway property market | The New Daily. (2018). Retrieved from https://thenewdaily.com.au/money/property/2017/08/04/victims-property-market/
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