Buying, Upgrading and Flipping Trends of Real Estate in Australia - Statistics Project Example

Buying, Upgrading and Flipping Trends of Real Estate in Australia Name: Course: Institution: Date: Contents Contents 2 Introduction 3 Before the GFC 3 After the GFC 4 Conclusion 6 References 7 Introduction The global real estate industry is facing a number of challenges in the global market. One of the most evident challenges has been the national and international real estate bubble bursts in the market. This evaluation develops a special focus of the Australian real Estate industry in both the pre and post-GFC period. The valuation explores on the sustainability of the industry both in the current and future market contests across the globe. Before the GFC In the period before the GFC period, the Australian real Estate industry was at its growth stage. At this period, the Australian market was slowly shifting from the paper use of assets holding to the focus in the use of real assets such as real estates as an alternative route for holding wealth in the market. In this regard, the industry was in its growth state and was gradually developing. At this period, there was a rising demand for houses in the main urban centres as more and more personnel and people moved from the rural to urban centres. This was especially influenced by the increasing industrial and technological development across the market which offered an increased number of employment opportunities across the market. This meant that the demand for housing across the market was beyond the offered supply creating a rising industry trend. However, due to the unavailability of enough funding for the industry from the financial institutions led to a slow industry growth trends in the market. This was a pure contrast to the USA real estate industry which at this period had already exceeded the GDP growth rates in the market, and the financial institutions were more willing and ready to offer loans to the real estate developers across the market as the prices and profitability levels increased respectively. It is this trend that led to a variance in the impacts caused o the USA and Australian real estate industries upon the occurrence of the 2008 GFC. Although the Australian industry declined by over 4.5%, (as illustrated in figure 1 below on the rising trend of the housing industry up to 2010) the USA industry experienced negative growth rates over the crisis period. Figure 1: Australia Real Estate Growth Trends up to 2010 Source: Macro Business, 2013 After the GFC Since the GFC the Australian market ad industry has faced a number of strategic changes in the market. In this case, the industry continues to project and expand the demand and supply of the real estate products’ expand across the market. Since the GFC in 2008, the industry prices remain static up to the 2010 period when the bubble started rising and developing once again in the market. In this case the industry has been on a forward and positive rise in the last decade. In this case, statistics indicate the overall real estate industry has increased with an average 4% rate annually over the last decade (Global Property Guide, 2016b). The rise and development of this changing market concept have been largely driven by the rising demand for housing in the main cities and urban centres across the globe. In this context, the rising income and economic standards in the market, as well as the perceived democratic and security aspects in the market have not only attracted local investors, but equally the international foreign investors as well. However, although this is perceived as a positive trend development, a majority of the economists and analysts have argued on the risky nature that the Australian real Estate bubble might burst any times in the market. First, one of the noted challenges in the market has been a high real estate price rise as contrasted to the GDP and overall per capita rise in the market. As such, analysis such as Verrender (2016) argued that the price is have increased by an average rate of 10 to 1 as compared to the GDP growth rates in the market, s illustrated in figure 2 below Figure 2: House and Real Estate Price Changes Source: Global Property Guide, 2016 As such, this has been largely linked and equated to the USA ore-global financial crisis period between the years 2000 to 2007 respectively. In this period, it is reported that the real estate industry prices rose at a higher rate in the USA to an extent that the prices were no longer sustainable in the market leading to the bubble that preceded the 2008 global financial crisis. This phenomenon is feared to recur in the Australian real estate industry. However, disagreements in the evaluation of the current real estate situation exist. Some of the economists argue that the current market housing supply in major urban areas and cities in Australia such as Perth, Melbourne, Sydney and NSW are already in the excess of the current housing demand in the market. These figures have been backed up by the Australian bureaus of statistics figures on housing demand and supply in the major cities across the nation (Chung, 2015). However, opponents of the idea of a real estate bubble in Australia state that the oversupply is only based on the current number of urban dwellers a number that is on the rise and it’s expected to demand more than the already supplied houses in the market. Thus, this has been the main influence base for the increased private loans in the market for the real estate industry developers. The key risk and challenge exposed by the economics is that the high rate of real estate growth rate and high prices both in terms of new houses acquisition and in rental prices is unsustainable in the long run period. The current situation in the Australian real estate industry is different from the US real estate industry. On one hand, since the 2008 GFC, the USA market, especially the financial sector developed stringent lending policies for the real estate developers. As such, the number of loans projected and advanced in the market is less as compared to those in the Australian market (Chung, 2015). Similarly, the process and rate of growth of the USA real estate industry have been significantly lower as compared to the Australian real Estate rate of growth across the market. Thus, a strategic evaluation of the Australian real estate industry indicates that the industry it at a higher rate of experiencing long-term market unsustainability into the future. Conclusion In summary, the above analysis offers a critical evaluation of the buying, upgrading and flipping in the Australian real estate industry. The analysis classified the market into two main clusters, namely the pre-GFC and the post-GFC period. On one hand, an evaluation of the pre-financial global crisis period illustrated that the industry had a low real estate growth rate as the economy was slowly developing. Moreover, the urbanisation rate in the nation was relatively low across the market. On the other hand, the evaluation established that on the post-GFC period, the Australian real estate industry has been effectively spreading and growing. In this case, although a high growth rate is high, it is well beyond the current GDP rates, implying the risk of a bubble burst in the future. As such, through this process, the analysis indicated that the industry is facing a number of challenges in the market and is bound to experience a bubble rise and burst in the global market in the future. Thus, this analysis forms the conclusion that the government as well as the industry stakeholders should join hands in the development and formulation of relevant control systems and policies to govern the system and industry growth rates into the future. References Chung, F., 2015, Will housing bubble pop in 2017? [Online] Available at: < http://www.news.com.au/finance/real-estate/buying/will-housing-bubble-pop-in-2017/news-story/4fe05fed1c277a096df33242a26caf6c> [Accessed: 28th April 2016]. Global Property Guide, 2016, House price rises accelerating in Australia, [Online] Available at: [Accessed: 28th April 2016]. Global Property Guide, 2016b, House price rises accelerating in Australia, [Online] Available at: [Accessed: 28th April 2016]. Macro Business, 2013, The history of Australian property values, [Online] Available at: [Accessed: 27th April 2016]. Verrender, I., 2016, A bubble is building that could shake our economy to its core. [Online] Available at: < http://www.abc.net.au/news/2016-02-29/verrender-housing-bubble-is-building/7206678> [Accessed: 28th April 2016] Read More