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Foreign Investment Influence on Housing Sector Australia

   

Added on  2020-03-16

17 Pages4299 Words39 Views
Running head: FOREIGN INVESTMENT IMPACT ON AUSTRALIAN RESIDENTIALREAL ESTATE AND HOUYSING AFFORDABILITYFOREIGN INVESTMENT IMPACT ON AUSTRALIAN RESIDENTIAL REAL ESTATEMARKET AND HOUSING AFFORDABILITYName of the StudentName of the UniversityAuthors Note

1FOREIGN INVESTMENT IMPACT ON AUSTRALIA’S RESIDENTIAL REAL ESTATEAND HOUSING AFFORDABILITYTable of ContentsIntroduction......................................................................................................................................3Research Aim...................................................................................................................................4Literature Review............................................................................................................................6Research Design and Methods.......................................................................................................10Summary........................................................................................................................................11References......................................................................................................................................12

2FOREIGN INVESTMENT IMPACT ON AUSTRALIA’S RESIDENTIAL REAL ESTATEAND HOUSING AFFORDABILITYIntroductionThe objective of this research proposal is to analyze on whether foreign investment influence theresidential real estate market in Australia and housing affordability. Housing is considered as themost vital asset that is owned by majority of the households of Australians. It is a hugehousehold wealth component and act as investment vehicle for the people in Australia. Hugemortgages as well as business loans are secured against the Australians residential dwellings. Ithas been noted from the recent study that residential real estate market contributes hugely to theGross Domestic Product (GDP) in Australia (Burke, 2012). The problem that arises from thisresidential real estate market is that variation in residential property prices influences thebehavior of economic variables that includes household consumption in other goods and theirfinancial stability (Newton & Glackin, 2014). Over the past few decades, the residential priceshave risen by an average of 7 ¼ % each year. As a result, the residential real estate market hasreflected steady growth by around 3% each year since the year 1970. At the end of year 2000,the prices of residence in Australia in relation to average income were recorded highest in theglobe. In addition, in the year 2011, the prices of residence accounted six times of the averageincome of the households in Australia. However, this nation experiences real estate bubbleduring this period. Furthermore, the increasing residential prices as well as low rate of interesthave stimulated the growth of the residential real estate market in this country (Wadud et al.,2012). Despite bad economic conditions, the prices of residential property’s have increasedstrongly due to support of government incentives and this supported in the real estate marketgrowth. In addition, foreign investment plays a vital role in strengthening the residential realestate market in this country. This means that the demand as well as supply of housing inAustralia real estate market increased owing to foreign investment. However, this demand in

3FOREIGN INVESTMENT IMPACT ON AUSTRALIA’S RESIDENTIAL REAL ESTATEAND HOUSING AFFORDABILITYresidential market generated several construction projects, created new opportunity for thehousehold to buy the property and increased employment in the nation. On the contrary, hugeforeign investment created problems of housing affordability (Agarwal et al., 2015). This meansthat rise in prices of residence in Australia pushed domestic home purchasers out of residentialmarket and near about 10-20% of new housing are brought by foreigners. It has been opined byBlomstrom (2014), foreign investment is considered as the main driver of causing housingaffordability problems to the low income households in Australia. Recent study shows that the average price of residence has become equivalent to the averageearnings of people of seven years. There are few factors that contributes to the rise in residentialproperty includes-Higher credit availability owing to financial deregulationLow rate of interest since recessionary phase increased borrowing capacity because oflower repaymentsReducing supply of land by the Australian governmentRising prices of average floor area of new dwellings by 53.8%.Reforms in tax structure adopted by the Australian government including capital gainstaxRestrictions imposed by the government on the land use or preventing for higher densityuse of landAgeing population growth in Australia Research Aim

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