Macroeconomics Australian Surging Housing Economy

Question: Discuss about theMacroeconomicsfor Australian Surging Housing Economy. Answer: Introduction This aim of this report is to build up the understanding of the macroeconomic concepts in the context of the Australian surging housing economy. This report focuses on the different factors, which may affects the housing pricing in Sydney, Australia. Meanwhile, it also provides some macroeconomics solutions related to the affordable housing for the younger generation. Finally, this report evaluates the housing bubble situation in the Australia may affect the economy. Factors Affect the Australias Surging Housing Prices Australian real estate is increasing significantly day by day and its economy is very resilient and flexible. Consequently, Australian housing sector affects the economic growth rate of the country. A real estate bubble may impact on the buying behavior of the people (Jord, et al., 2015). For this, a housing bubble situation has been seen in the Sydney, Australia i.e. 19.9% in 2015. There are different factors, which affects the Australian surging housing prices. Interest rate Investment demand Economic climate Demography factor Interest Rate Interest rate is the significant impact on the rising housing price in Australia Sydney. For this, lower interest rate in Australia, borrowers has easy to borrow the money from the bank, financial institutions at low rate interest, which may raise the housing prices. Simultaneously, low rate interest leads to raising the investment in the real estate, which may cause the problem of housing bubble situation. Whereas, low rates would attract the more investor in order to invest the money in housing instead of the lending (Steinhardt and Manley, 2016). Simultaneously, low interest would decrease the cost of borrowings against the mortgage payment. In the current environment, Reserve Bank of Australia (RBA) is reduced the rates by 1.50% in August 2016. Demography Large demographic factor in Australia has a significant impact on the housing prices. There is large no of households increase in Australia in every year due to a large population. Hence, it can raise the demand for housing consequently; it will impact on the housing price. In the current scenario, large Australian population enables to enhance the housing bubble situation in Sydney Australia. On the other hand, there are 473500 foreign immigrants are increased in Australia population hence; it may impact on the housing prices. Economic Climate In the current, Australian economy is raise by 2.5%, which depicts the Australia economic condition is growing. Whereas, the Reserve bank of Australia controls the inflation rate which is 1% in 2016 and it also controls the unemployment rate i.e. 5.6%. As a result, it can be helpful to raise the income of the people as a result; people have more invest in the housing activity, which may positive impacts on the Australia surging housing prices (Jord, et al., 205). Concurrently, unemployment situation may impact on the real estate prices in Sidney, Australia. Investment Demand Investment demand factor is significant for the Australian surging housing prices, because low-interest rate and inflation may raise the investment demand of people. At the same time, there are some factors which can raise the housing prices of the Sidney Australia such as tax benefits, institutional reforms, increasing rental income, capital market, and broader development in the economy (Chancellor, et al., 2015). Instead of this, equity market of Australia downwards in 2000 but the real estate is more stable to invest the money. Along with this, low-interest rate helps to raise the interest of investors to buy more property, because in Sydney rental market will worth owning. Macroeconomics Solution for the Affordable Housing Affordable housing price is essential for the younger generation. In the current environment, in Sydney Australia housing price is on a hike so that the government has taken the necessary steps in order to provide the affordable housing to the young generation. Whereas, the Australian government is implemented the policy name The National Affordable Housing Agreement (NAHA), which promise to provide the affordable housing price. Simultaneously, this policy can be helpful to reduce the problems related to the housing bubble situation in Australia (Dufty and Rogers, 2016). However, Australian people are faced many housing related problems such as high prices, housing stress, and unaffordable place. At the same time, government formulates some macroeconomics policy related to the affordable housing prices in Australia, which impact on the demand and supply of the housing prices such as rebate in taxation, Development of infrastructure, financial support, Immigration policy, and Agreemen t related to the national housing. The National Affordable Housing Agreement (NAHA) Australian government is introduced The National Affordable Housing Agreement, which enables to provide the affordable safe housing to the poor people. Along with this, it also involves the people in the economic and social competition. The NAHA policy is an agreement with the Australian government council for the effective to solve the housing bubble situation. Consequently, this policy enables to offer the $ 6.2 billion worth of real estate housing for the below an average level income people (low and middle income) in Australia. In spite of this, NAHA can be helpful in different aspect such as poor people who have no homes to live, social housing, Australian natives who lives in remote areas (Li, 2016) On the other hand, NAHA is also an agreement with a commonwealth state housing for the purpose to provide the financial support to the poor people who need affordable housing. As a result, till 2003 to 2008 common wealth state housing provides more than 5.2 million housing assistance related to the community housing and private rental assistance. As a result, effective assistance can be helpful to influence the young generation towards the housing. Policy Related to Foreign Investors Australian government makes the effective policy for the foreign investors in order to control the surging housing prices, especially in Sydney. Therefore, no one investor can buy the property in Australia without any prior consent of the Foreign Investment Review Board (FIRB), because it creates the housing bubble situation which may negative impact on the Australian middle and poor people (Wang and Otsuki, 2015). In this scenario, new laws of Australian related to the foreign investors transferred to the Australian tax department in order to overcome the housing prices. Australian government takes strict action against the investors who buy the property illegally such as charge the commission, interest. As a result, low level and middle-level income people to get the accommodation easily at affordable prices. In addition, Austrian government, government to control the foreign investors through the different taxes and duties such as government raise the stamp duty by 7 respectively. Similarly, the Australian government is raised the property tax by 0.75%, which is helpful to overcome the housing bubble situation in the Australia (Beer, et al., 2016). Housing and Homelessness Policy of Council of Australian Government (COAG) Australian government takes the necessary steps for the poor people who have no accommodation to live. Consequently, government starts work to provide the $1.3 billion housing to needy people in every year under the national affordable housing agreement. As a result, it can be helpful to reduce the homelessness and indigenous housing (Blunden, 2016). Apart from this, Australian government is provided the $4.5 billion to the national rental affordable schemes in order to provide the affordable accommodation for the Australian people and their families. Simultaneously, Australian government is also provided the financial incentives to the community organizations for build the rent dwelling housing at low cost for the low and middle-level income people. As a result, 23500 new affordable and social housing is provided to the low and moderate level income people in Sydney. Thus, this policy would be helpful to build the effective economy infrastructure in the Australia (Davison, et al., 2 016). Commonwealth Government Commonwealth assistance is significant for the social housing and it measures through the National Affordable Housing Agreement and it associates with the National Partnership Agreement. For this, Australian government ensures the affordable housing to the low-level income people through dwelling of houses. The commonwealth policy is effective for the low-level income people because it helps to lend the money at the low rate of interest that is helpful in affordable housing. The Australia legislative of the commonwealth is high because it comprises the Australian union government, state head. Concurrently, the commonwealth government improves the housing situation in the Sydney Australia through the affordable rental housing to the low-income level people at the low rate (Yates, 2016). Meanwhile, the government reduces the homelessness situation in the Sydney, which is helpful to overcome the surging housing prices in Australia. Moreover, commonwealth government enhances the housing supply situation through the government surplus land. As a result, it enables to make the affordable housing for the poor people. Conclusion From the above discussion, it can be evaluated that the housing prices in Sydney, Australia is rising so that it affects the low and medium level income people. At the same time, different factors housing factor creates the housing bubble situation in Australia such as low interest rates, demography, and investment demand. Meanwhile, the government has been taken the several measures to ensure the affordable housing situation in Australia such as COAG, commonwealth government, NAHA, and foreign investors policy. References Jord, ., Schularick, M. and Taylor, A. M. (2015) Betting the house,Journal of International Economics,96, pp. 1-18. Steinhardt, D. A., and Manley, K. (2016) Exploring the beliefs of Australian prefabricated house builders,Construction Economics and Building,16(2), pp. 27-41. Jord, ., Schularick, M. and Taylor, A. M. (2015) Betting the house.Journal of International Economics,96, pp. 1-21. Chancellor, W., Abbott, M. and Carson, C. (2015) Factors promoting innovation and efficiency in the construction industry: A comparative study of New Zealand and Australia,Construction Economics and Building,15(2), pp.63-81. Dufty, R. and Rogers, D. (2016) Housing in Australia: A New Century, Housing in 21st-Century Australia: People, Practices and Policies, 1, pp. 121-141. Li, J. V. (2016) Is Residential Housing Affordable? An Improved Price-to-Income Ratio Approach,An Improved Price-to-Income Ratio Approach, pp. 114-121. Wang, Y. and Otsuki, T. (2015) Do institutional factors influence housing decision of young generation in urban China: Based on a study on determinants of residential choice in Beijing,Habitat International,49, pp. 508-515. Beer, A., Bentley, R., Baker, E., Mason, K., Mallett, S., Kavanagh, A. and LaMontagne, T. (2016) Neoliberalism, economic restructuring and policy change: Precarious housing and precarious employment in Australia.Urban Studies,53(8), pp. 1542-1558. Blunden, H. (2016) Discourses around negative gearing of investment properties in Australia,Housing Studies,31(3), pp. 340-357. Davison, G., Legacy, C., Liu, E. and Darcy, M. (2016) The factors driving the escalation of community opposition to affordable housing development, Urban Policy and Research, pp. 1-14. Yates, J. (2016) Why Does Australia Have an Affordable Housing Problem and What Can Be Done About It?, Australian Economic Review,49(3), pp. 328-339.