A Study of Factors Affecting the Rise of Housing Prices in Australia

This research paper investigates the various factors contributing to the increase in housing prices in Australia, focusing on the economic and social impacts. It examines the problem statement related to household debt and the relationship between house price changes and household economics. The study aims to understand these factors and evaluate the effects of rising housing prices, considering both positive aspects like increased aggregate demand and private consumption, and negative aspects like reduced affordability and wealth transfer. The research also delves into the influence of demographics, low interest rates, economic climate, and the wealth effect on the Australian housing market. The conceptual framework highlights the interconnectedness of these factors, including government policies, in shaping housing affordability and market dynamics. Desklib provides access to similar assignments and resources for students.

Running head: FACTORS AFFECTING THE RISE OF HOUSING PRICES IN AUSTRALIA
Research Topic: Factors affecting the rise of housing prices in Australia
Name of the Student:
Name of the University:

1
FACTORS AFFECTING THE RISE OF HOUSING PRICES IN AUSTRALIA
Table of Contents
1.0 Introduction................................................................................................................................2
2.0 Problem statement.....................................................................................................................2
3.0 Research aim and objectives......................................................................................................3
3.1 Research aim..........................................................................................................................3
3.2 Research objectives...............................................................................................................3
4.0 Justification of the project.........................................................................................................3
5.0Potential research output.............................................................................................................5
6.0 Conceptual framework...............................................................................................................7
7.0 Methodology..............................................................................................................................9
7.1 Data collection method..........................................................................................................9
7.2 Data analysis method.............................................................................................................9
8.0 Organization of the study.........................................................................................................10
9.0 Project budget and justification...............................................................................................10
10.0 Gantt chart.............................................................................................................................13
11.0 Conclusion.............................................................................................................................13
References......................................................................................................................................15

2
FACTORS AFFECTING THE RISE OF HOUSING PRICES IN AUSTRALIA
1.0 Introduction
The research paper is based on the factors affecting the rise of housing prices in
Australia. The economic growth of Australia is related to the housing sector. The paper is
analysed the current housing market conditions within Australia. Over the recent years, the paper
is examined the factors which caused increase into housing prices (Knoll, Schularick, & Steger,
2017). There are various factors which affect the housing prices on economy of Australia. Home
ownership is considered as a key element into higher standard of living. Approximately 70% of
the Australian households are living into ownership occupied dwellings. A proportion of the
house owners without the mortgage are decreased over time that is considered as indication of
the household within the Australian economy. Cesa‐Bianchi, Cespedes and Rebucci (2015)
stated that housing plays a role to the social well being within Australians. The housing provides
a social as well as economic environment which is required for the political stability along with
prosperity. Throughout five years from the year 2000-01 to 2005-06, the established prices of the
house are increased by more than 110% (which is an average of 16.2% a year) (Ashworth &
Perera, 2015). The paper will analyse the housing market of Australia and investigate the factors
drive rise into housing prices. There is also evaluation of the effects of rise into prices.
2.0 Problem statement
Rise into the household debt is problematic for the economy into medium to the long
term. It supports of slow as well as steady approach towards the interest rate similar which is
observed at the economics around the world. There is stronger relationship among the price of
household changes along with households within Australia. The results show that there is $1,000

3
FACTORS AFFECTING THE RISE OF HOUSING PRICES IN AUSTRALIA
increase into the value of house which is associated with $240 increase into the debt of
household among the house owners. When there is an increase into housing wealth, then there is
reduction of debt services (Ferrero, 2015). The movements related to house prices are provided
of impacts on the activities of labour market. The magnitude of this effect is varied by the gender
and type of family.
3.0 Research aim and objectives
3.1 Research aim
The aim of this research paper is to understand the different factors in increasing the price
of housing within Australia. It evaluates the effects of the housing which is raised the prices
within Australia.
3.2 Research objectives
The objectives of this research paper are as follows:
 To understand effect of increase in price of housing on the Australian household
 To execute and formulate the policies have greater interest to the Australian economy
 To examine the immigration effects of the housing prices within Australia
 To discuss the negative effects of the rising prises of housing in Australia
4.0 Justification of the project
The project report examines the positive and negative effects of the rise of house price on
economy as well as households of Australia. The positive effects are that the price of house is
affected aggregate demand as well as economic activities. Wooldridge (2015) stated that there is

4
FACTORS AFFECTING THE RISE OF HOUSING PRICES IN AUSTRALIA
an optimistic expectation to the returns on the property investment which is occurred with rise of
the price of house. There is an increase into private consumption due to increase of house prices.
There is a change into the financial behaviour of the house owners as result of hike in price,
homeowners are becoming home purchases. Kohler and Van Der Merwe (2015) noted that there
is an increase into property prices which tend to have positive impact on the real GDP. Chappell
and Campbell (2018) discussed that within Australia, the real estate is become a key significant
investment asset. When the price of property is raised above cost of construction, then it is
profitable for construction of new buildings. Apart from the positive effects, there are also
negative effects of housing price such as rise into housing price raised the wealth of homeowners
but it reduced the affordability of the households those want to purchase of the houses (Gurran &
Phibbs, 2016). The buyers of home will require saving pay to higher deposits along with higher
mortgage payment. The result is that the consumption drops when there is an increase into price
of houses. Increase into house prices affects relative positions of the groups of people. The result
is that there is wealth transfer increased the house price which has macroeconomic effects.
With regards to the housing affordability within Australia, Connolly, La Cava and Read
(2015) noted that there are urban households of around 542,000 as well as non-urban based
households are 308,000. Windsor, La Cava and Hansen (2015) discussed that there are high
incidence of the housing stress are found among young as well as lone person. There is higher
affordability of problems which are observed among the lower income purchases of home. 14%
of lower income households are suffering from housing crisis. Mulley et al., (2016) noted that
36% of the lower income working households are facing housing stress as compared to 28% of
the lower income households. van den Nouwelant et al., (2015) argued that when the price of
housing is overvalued, then in case of Australia, there are normal house prices are dropped and

5
FACTORS AFFECTING THE RISE OF HOUSING PRICES IN AUSTRALIA
real prices. When there is burst of housing occurred, then it will harm the economy than
collapses of the stock market. There are three arguments which are mentioned to support the
research topic such as:
1. Housing investment is larger part of the direct household as compared to the
shares. There is fall into the housing prices will provide the households that there
is less wealthy than smaller share prices (Bentley et al., 2016). The investors
reduce the consumption, aggregate level of the economic activities reduces and
there is risk of increase into economic recession.
2. It is likely that the households are borrowed to purchase of houses than to
purchase of shares (Thomas & Hall, 2016).
3. When the borrowers are mortgaged to decline of the house values, then it ends up
with the negative equity. The houses owners are own more on mortgage loan than
current market value of the homes (Wood, Ong & Cigdem, 2015). There is
probability to rise of mortgage defaults, and there is proportion of loans held by
the banks as well as increase of lenders. The result is that there is lending capital
for the purposes.
5.0Potential research output
There are some of the factors which affect the rise of housing prices in Australia such as:
Higher income: Australia has lifted its productivity and the country is benefited for the
export of commodity because of resources boom, average incomes as well as household wealth
which is increased. The households are desired to spend their income to improve quality of
housing (Gurran & Phibbs, 2017). Into the coastal areas, there is higher demand of the holiday

6
FACTORS AFFECTING THE RISE OF HOUSING PRICES IN AUSTRALIA
homes. When there is limitation into supply responses, then there is an increase into demand
which leads to the higher prices.
Demographics: Australia has stronger population growth for their economy. Higher rate
of immigration is added to demand for the housing, as the immigrants are disproportionately
young adults. Over the time, there is a grown into the population of Australia. The average size
of household is declined due to increase of single person in addition to parent households. From
one year to other, there is a decline of average number of people per household from 2.7 to 2.5
(Minnery, 2017). The growth of entire population implied to increase in demand for the housing
which is major factor for the housing price within Australia. Change into the economic roles
reinforced the factors of demographic with regards to the housing demand within Australia.
Low interest rate: There is a decline into the standard home loan interest rates from mid
of year 1990 to early of the year 2002, there is an increase into amount of households which
borrow and give ability to bid the price of houses. The reason behind drop of housing loan
interest rate is lower of policy of reserve bank interest rate due to establishment of lower
inflation environment (Cox, Pavletich, & Hartwich, 2017). Due to increase into competition,
there is a reduction of the margin among the policy interest rate as well as loan rate of housing.
The housing finance market of Australia is shown as:
Typical
term of the
mortgage
(years)
Typical
loan to
value ratio
for new
mortgages
(%)
Variable
rate
mortgages
(%)
Owner
occupies
with the
mortgage
(%)
Home
equity
Mortgage
market
index
Usage of
the
mortgages
backend
securities
Australia 25 80 85 45 Yes 0.69 Extensive
Table 1: Housing finance markets of Australia

7
FACTORS AFFECTING THE RISE OF HOUSING PRICES IN AUSTRALIA
(Source: Bryant & Eves, 2014, pp-309)
Economic climate: The economic conditions within Australia are very good, and the
inflation is under control as well as unemployment rate which is fallen. There is average income
of people those are raised. There are stronger sentiments among both the investors as well as
owner occupies (Baker, Mason, & Bentley, 2015). This particular factor is resulted into
increasing the housing prices within Australia both in long as well as short runs.
Wealth effect: The housing is considered as the major store of the wealth. Within
Australia, gross housing assets account for half of the total personal wealth. The house owners as
well as investors of landlords are feeling wealthier than the rise into prices of the existing houses.
It is termed as wealth effect that leads to an increase into consumption expenditures (Chappell &
Campbell, 2018). There is an aggregate prices along with economic growth occurred to support
rise into the housing prices. This particular factor is contributed to hike of price of the Australian
housing.
Further, there is availability of the cost of land, cost of construction as well as
achievements to improve the quality of existing housing stock which are taken as the supply side
factors affect the price of housing (Baker, Mason, & Bentley, 2015). Reduction into the supply
of affordable rental housing, decline into the supply of housing and time takes to release of new
land are contributed to the house price inflation within Australia.
6.0 Conceptual framework
Traditionally, the Australians have higher degree of importance towards homeownership
that is perceived as important for stability, and creation of wealth. There are five major factors

8
FACTORS AFFECTING THE RISE OF HOUSING PRICES IN AUSTRALIA
Higher income
Demographics
Low interest rate
Economic climate
Wealth effect
Governmental policies
of Australia
Factors affect the
housing price
which are taken into considerations that affect the housing price within Australia such as higher
income, wealth effect, demographics, economic climate as well as lower interest rate (Brown et
al., 2011). A good housing is provided with social environment which is important towards
political stability along with prosperity. The conceptual framework of this research study is
shows as:
Figure 1: Conceptual framework of the research study
(Source: Created by author)
The housing affordability is emerged as issue among the policy makers. Rise into the
price of house has positive as well as negative impacts on the economy of Australia. The
negative effects are being observed by the policy makers. For longer period of time, the

9
FACTORS AFFECTING THE RISE OF HOUSING PRICES IN AUSTRALIA
Australian government is encouraged home ownership throughout direct grants of the home
buyers. The direct governmental is controlled over lending activities of the financial institutions
such as banks which are removed. The independent variables are higher income, wealth effect,
demographics, economic climate as well as lower interest rate, meditating variable is
governmental policies and dependent variable is factors affects the housing price.
7.0 Methodology
7.1 Data collection method
The data are collected from various governmental resources which help the researcher to
understand the factors affecting the housing prices within Australia. In order to support collected
data, the researcher conducts an interview with governmental bodies, immigrants, as well as the
residential individuals. The main findings of this research are to analyse current housing market
of Australia for planning the future growth strategies (Stapledon, 2016). The data are also
collected from “Real Estate Institute of Australia (REIA) and ABS”, which are related to
disposable income and cash rates from Reserve bank of Australia.
7.2 Data analysis method
The chosen research method of this research study is qualitative research, which are used
to access of variables affecting the rise of prices of houses within Australia and rise of price
affect the Australian economy. The sources of qualitative research method is interview,
documents as well as observation to understand along with explain of the social phenomenon.
This particular method is originated from the social sciences which enable the researchers to
study of cultural oriented phenomenon (Waite Cassidy, 2017). The qualitative method is
included of data sources by means of observation, interview, questionnaires, and documentation

10
FACTORS AFFECTING THE RISE OF HOUSING PRICES IN AUSTRALIA
along with perception. The qualitative research methods are involved of data collection for
personal experiences, interview, and interactions along with observations which are significant
towards the personal life.
8.0 Organization of the study
In this research study, the housing market of Australia is investigated causes as well as
effects of the rise of house price from the socio-economic point of view. Yang and Yang (2014)
mentioned the factors which are considered for the house price rise within Australia. The short
term factors are included of lower interest rates, as well as positive economic climate. The long
term factors are demographics as well as increase into wealth effects. It is found that the housing
prices are being influenced by restriction policies on management of land. The housing
affordability issues are not uniform across Australia (Wood & Ong, 2011). The growing
population of Australia is required to house. If people are wanted to live into the cities, then they
are required to adapt as well as accept of higher population densities.
9.0 Project budget and justification
Task Name Duration Resource Names Cost
Factors affecting the housing
price in Australia
30 days $4,840.00
Selection of project topic 11 days $1,800.00
Decision on topic of interest 3 days Project Manager $480.00
Allocation of tasks among 2 days Researcher $112.00

11
FACTORS AFFECTING THE RISE OF HOUSING PRICES IN AUSTRALIA
the team members
Finalizing the research
problem
2 days
Project Manager,
Researcher
$432.00
Preparation of the research
proposal
3 days
Analyst, Project
Manager
$720.00
Analyze research aim and
objectives
1 day Researcher $56.00
Literature study 8 days $1,024.00
Review the literature 2 days
Consultant, Project
Manager
$480.00
Decide on specific project
idea
2 days Researcher $112.00
Planning for research design 2 days Researcher $112.00
Design solutions to the
research problems
2 days Project Manager $320.00
Methodology 6 days $1,024.00
Collect the data 2 days
Project Manager,
Researcher
$432.00
Observations and interview 2 days Analyst, Project $480.00