Factors Driving the Booming Housing Market in Sydney and Melbourne

This essay provides an in-depth analysis of the booming housing market in Australia, specifically focusing on Sydney and Melbourne. The paper explores various factors contributing to the high housing prices, including increased foreign investment, friendly government regulations, urban planning and land supply, high construction and maintenance costs, high taxation, low interest rates, and domestic investors. The essay also suggests several strategies to reduce housing prices, such as limiting competition for rental housing, penalizing individuals who leave homes empty, introducing incentives for increased housing availability, reviewing and reforming laws concerning urban planning, and reforming stamp duty exemptions. The essay also offers insights for young professionals on how they can afford to buy a house in such a costly market. The author concludes by emphasizing the importance of housing as a basic human need and the economic dynamics shaping the market.

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With respect to the booming business in house markets in Australia, specifically in the
two capitals of Sydney and Melbourne, the question that remains unanswered is the reason as to
why housing prices are rated relatively so high yet in Australia there are more than enough
households. This still remains a mystery despite various common clarifications and explanations.
Some of these explanations include that the demand of housing in Sydney is so high that the
suppliers are not able to meet the peoples demand (Brooks, 2012). Others may argue about the
few rich individuals who compete in showing off by buying these high priced houses thus
increasing their prices due to increased competition. This paper shall the various reasons that led
to high prices.
One of the drivers of high prices of housing in Sydney and Melbourne is increased
foreign investments. For instance, the Chinese residents who are relatively rich have been known
to invest in buying these houses. The increased competition between the foreign investors and
the local investors has led to the house owners to dramatically increase the housing prices so as
to accommodate the pressure (Cook, Davison, & Crabtree, 2016). The supply and demand curve
shifts due to these high binders who compete in buying these flourish houses found in the two
capitals. These Chinese investors have even caused their government and the government of
Australia to such for policies which shall regulate this massive investment and movement
towards housing in Sydney.
Friendly government regulations have also participated in driving housing prices up.
Regulations such as giving permits and licenses to housing contractors and also providing
passports to these foreign investors have led to massive and high housing prices over the past
few years (Dept, 2018). The government generates income from these foreign and local investors

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who buy these high priced houses hence, the investors been a source of income and revenues.
These regulations have dramatically led to high housing prices.
Urban planning and land supply has also contributed to the high housing prices in Sydney
and Melbourne. The two capitals authorities, such as the housing regulators and urban planners
have discovered that the two cities are densely populated by the wealth community thus these
may be seen as a source of income (Gurran & Bramley, 2017). The urban plan may also have set
a degree of living standard that might be met by only a few selected groups by the criteria of
high standards thus leading to the increased housing prices. This is because only the local and
foreign investors who are wealthy enough could only meet the criteria thus leading to high
prices. For instance, requirement of by the local authorities to meet criteria of construction of
real estates. High construction and maintenance cost may have pushed the housing prices up.
Relatively high tax associated with property owning is another suspected driver of high
housing prices. If high taxation rates are associated to housing construction, this in return will
relatively lead to high housing prices (Hulse, Pawson, Reynolds, & Herath, 2014). This is as a
result of contractors meeting their construction cost and also generating benefits out of the effort.
These taxes imposed such as increased taxation in building and constructing materials may lead
to end result of houses been priced highly.
Low interest rates may be yet another driver of high housing prices. Interest rates related
to living standards and cost of construction may be relatively low hence to increased demand and
supply (In Healey, 2016). In return, this leads to increased prices for both properties and services
such as housing prices. These low interest rates enhance maximum profit generation thus
positively and widely encouraged by the natives of Sydney and Melbourne.

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Another driver may be as a result of high domestic investors purchasing the houses in the
capitals of Sydney and Melbourne. Local investors may contribute to high house prices due to
they tend to set some standard and class which acts as a criteria for anyone interested in
purchasing the houses in a particular area or region (Junankar, 2016).
The following are the suggested ways in which house prices can be reduced.
Limiting competition for rental housing
Unhealthy competition promotes inflation whereby the weak are denied the right of
purchasing houses due to the high prices attached to the houses. By limiting the competition, this
will create a healthy competitive environment whereby everyone has equal rights and abilities to
purchase houses at fair prices (Laukea & 'Laukea, 2012). The competition can be limited by
adequately providing various choices of housing categories whereby an individual can choose
from thus meeting the taste and preferences of people. If taste and preferences of different people
are met, this reduces competition as these people are contented with what they have purchased
due to diversity and variety availed. Reduced competition reduces demand thus in return this will
force the suppliers to reduce the housing price due to lack of demand.
Inducing penalties and charges to those individuals who have a tendency of leaving their
homes empty. Some rich and extravagant individual just buy houses and do not live in them.
Some just buy these houses and rarely live in them just for the purposes of show off or just as to
be at per with their competitors (Laukea & 'Laukea, 2012). This action denies the rest of group
members with no houses live in thus leaving the few available to be highly charged so as to meet
the competition. Some of the competitors may not be so rich hence this forces them out of the
business without their consent. Penalty introduction will discourage such behavior of purchasing

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and abandoning the houses hence increasing availability of houses hence in return this will
ensure downfall of prices regarding the purchase of houses.
Introduction of friendly incentives which will enhance a cluster of houses availability in
these two capitals and thus lowering the density of apartments blocks. In short, these means
creation of more space for accommodation due to shared space between the occupants instead of
purchasing private or individual houses which occupy large spaces which can be used to
construct more houses to accommodate more people (McKenzie & Rowley, 2013). Increased
houses will in turn reduce housing competition thus reducing the prices thus making it available
for the members of the society.
By reviewing and reforming laws concerning the urban planning sector. Some of these
laws do not reflect in changing the demand of the housing market. Some laws are usually very
strict thus forcing out of the market some of the members of the society from owning a property.
These laws may include long and tiring procedures which discourage many who quit in the
middle of the process (Winter, Albone, Blaze-Vaughan, & Skinner, 2011). Some may involve
too much paper works and follow up that might be a discouraging procedure to go through.
Hence reviewing such laws might reduce some of these procedures which lead to end price been
so high. If reformed, some part are cut off and so is the prices thus different individual may
acquire the houses.
Another way that will facilitate down fall of housing prices is the reformation of stamp
duty exemptions. Stamp duties do not cover all regions of property owning, thus by reforming
such stamp exemptions, this will mean that more people are able to own their own housing
incomes since the housing priced will be forced to reduce so as to accommodate the change in
individuals ownership. For instance, NSW provides stamps to a group of people who are

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interested in purchasing a house for the first time which are pocket friendly and economically
wise. Thus, switching the stamp duty to land tax, it will therefor lead to improved housing and
property affordability (Wu, Chyl, & Chan, 2010). This is met by making it easier for families to
shift their essentials change over a period of time. In return, this will enable better use of existing
houses available hence reducing the increased cost of owning a property. The shift from stamp
duty to land tax is supported by the NSW organization in examining the significant of change.
If I am a young professional with a very young family, the following reasons are shown
on how one can afford to buy a house in such a costly housing market in Melbourne or Sydney at
such current exhausting prices;
I would start by keeping my savings. Little by little, the savings shall accumulate and
after a certain period of time, they would have accumulated enough to purchase and own a
property of my own. This may take some time but since am young, with time these savings will
be enough to have a property I can confidently claim to be mine (Winter, Albone, Blaze-
Vaughan, & Skinner, 2011).
I would also seek advice from financial experts and planners about how I can purchase a
property of my own. Getting advices from these experts broadens my thinking capacity and also
will enhance critical thinking towards achieving my goals. In most cases, planners and financial
experts monitors ones spending behavior and trend thus according to the status of finances and
incomes, they will be able to give me the appropriate advice on how to go concerning the idea of
purchasing my own house despite the harsh economic rates in Sydney or Melbourne.
Learning about investments would also play a critical part in my target setting (Junankar,
2016). I may have saved enough savings in my account but it would be critical for me to learn

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about the investments as the market environment keeps on changing from time to time. Thus,
from learning about the investments, this will boost my decision making hence helping me in
achieving and attaining my set goals and objectives of buying a house in Sydney or Melbourne.
Conclusion
Housing is one of the essential basic needs of human needs as houses provide shelter
from severe sun burns, rain and adverse weather conditions. Despite the high housing prices, the
business is booming in Sydney and Melbourne due to various factors. Some are pushed out of
the market by these forces while other thrives even in such conditions.
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