Question: “Research the reasons for the sharp growth in Sydney real estate prices and rentals. Then analyse the likely effects on future generations.”
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Australia has become notorious for its expensive house pricing and many factors contribute to it. Sydney is Australia’s most expensive city and the third least affordable city to buy or rent in a house in the world. The median price for a house is $642,000 and to rent one is $500 a week. It is because of this, it makes you question, why is it so expensive? Australia is ranked second in the HDI ladder with a HDI of 0.933, this undoubtedly makes Australia a very attractive country to live in. Because of this, the desire for a house has caused many people to bid absurd amounts of money for a house in Sydney. Another reason for the increase of real estate pricing is the inadequate amount of houses for the demand. Low interest rates continue to drive demand for houses in Sydney. Future generations will soon suffer because of these reasons.
The appeal to live in Australia has increased over the years as the living conditions have increased, the need for a house has caused many to over bid on houses. There are many aspects of Australia that make it desirable to live, these factors include the exception health care, high levels of education, social programs and healthy living condition. The decisions of past governments has caused many positive effects on the country, the Whitlam Government’s choice to introduce Medicare created multiple opportunities for Australian residents. It covers numerous health care costs and allows you to be treated as a public patient in a public hospital, by a doctor appointed by the hospital for free. Another beneficial service provided by the Australian government is Centrelink. Centrelink is able to give payment and services to retirees, the unemployed, families, carers, parents, people with disabilities, Indigenous Australians, and people from diverse cultural and linguistic backgrounds, and provides services at major changes. Services like Medicare and Centrelink are some of the many reasons that make Australia a very attractive country to live in. Unfortunately, due to these services, many wealthy people are immigrating to Australia and overpaying for houses. Properties regularly sell for $250,000 to $500,000 more than the set reserve price. Though the pricing of housing has increased, it is able to provide more money to the Australian economy. The effect on future generations will impact negatively because of the prices that the houses are going to. This will continue to become worse as the housing in Sydney reduces while the demand for the houses increases due to immigrants and younger generations looking to buy a house.
The demand for houses in Sydney is significantly larger than the amount of houses available. The scarcity of available houses causes many other houses to increase in price. The Sydney Metropolitan Strategy planned for 133,975 houses to be built from 1 July 2006 to the first quarter of 2012. Since the commencement of the Sydney Metropolitan Strategy only 80,466 houses had been built by the first quarter 2012. 53,509 (about 40%) homes had not been built and this has continued to bring the demand for housing in Sydney up. This strategy hoped to build a broad framework to secure Sydney’s place in the global economy by promoting and managing growth. The goals included a “competitive economy with world-class services and transport”, “a city of housing choice with homes that meet our needs and lifestyles”, “a great place to live with communities that are strong”, “healthy and well connected”, and ”a sustainable and resilient city that protects the natural environment and has a balanced approach to the use of land and resources”. The lack of housing for the population and demand has increased the price of the available houses. The increasing price of housing has caused the average age of home buyers to go into the 30s. Renting houses currently seems to be only the only solution to an independent housing for younger generations. Once again, although this will affect younger generations, it is providing money for the Australian economy which will benefit us in the future.
The low interest rates of banks has driven and accelerated the demand for houses in Sydney. These rates have become staggeringly low and will not be changing for some time. Buyers now have access to cheaper loans and the choice to buy has become much easier. Although the pricing of the houses are expensive, the money is cheaper. Home buyers will still require an $80,000 minimum deposit of 10%, including savings for fees such as stamp duty. A mortgage will still be left with the buyers and a good pay will be required to pay it off. The lower interest rate encourages spending and investing, leading to aggregate demand and causing economic growth. Although there are benefits of low interest rates, there are just as many negatives, the increase of house pricing is one of the major problems with it. These low interest rates have encouraged younger generations to purchase houses, leaving them with crushing mortgages that will last for years. The desire to buy more houses due to the low interest rates causes many home buyers to pay more than they were willing to.
Australia’s expensive house pricing continues to increase in price as many factors contribute. The effects of the rising house prices is able to be observed as it affects younger generations looking to purchase houses. The healthy living conditions in Australia compared to other countries has made it a very desirable country to live in, due to this, many people are moving from other countries to Australia. The demand for housing has increased significantly but the construction of the houses has not kept up with this demand, thus raising the prices of houses. The low interest rates provided by the banks has encouraged people to purchase houses, allowing the bank to profit off the interest rates over time.
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