Independent Review of the Housing Market in Sydney As an economist I have been commissioned by the NSW Treasury to write an independent review of the housing market in Sydney. This topic is of considerable interest to me as I have extensive research in the area and experience in the Sydney housing industry…
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i. In examining the overriding structure of the Sydney housing market a number of notable points were discovered. Recent shifts in the Sydney housing market have had substantial implications for the structure of real estate sales. In this context of understanding, there have been recent shifts in the type of economic structure exhibited in the Sydney housing market. Bell (2011) indicates that for many years the Sydney housing market wavered between perfection competition and monopolistic competition as middle class citizens participated in a market with larger corporate entities that operated in larger scale real estate. However, with the recent economic recession, coupled by social and economic shifts, increasing numbers of citizens have been restricted from entering the housing market. It’s been noted that, “Australia, once the exemplar of modestly priced, high-quality middle-class housing, to now the most unaffordable housing market in the English-speaking world” (Zappone 2011). Within this context of understanding, it’s noted that the Sydney housing market has increasingly shifted towards an oligopoly, as the only individuals able to gain market access are corporate entities with substantial sums of money, or upper class individuals. ii. There are a number of elements that characterize the real estate auctions in the Sydney housing market (Bidder’s Guide, 2011). In terms of common or private value auctions, the auctions are private in that the agent is not permitted to show the Bidders Record to anyone. In terms of sealed and open bidding, the bidding is open as the auctions are generally open, except that individuals must disclose their name, address and proof of identity to the selling agent. The bidding method is such that individuals need to raise their hand and let the auctioneer know they are going to make a bid. The winner is determined by who bid the highest, but the auctioneer has the ability to reject bids that might not be in the seller’s interest. It terms of price the buyer pays the price for the auction, and is required to pay a 10% deposit immediately upon winning the auction. iii. There is a process where buyer’s can potentially purchase items prior to auction. This process occurs as individual buyers submit prices for bid before the auction goes up for sale. The auctioneer then has the ability to accept or decline these auction prices according to the seller’s interest. If several bidders submit an auction bid prior to auction, then the auctioneer has the option of choosing the bid in terms of the seller’s interest. There is also a reserve price that must be met in order for the auction to be sold (Bidder’s Guide, 2011). iv. There are a number of recommendations that have been made regarding potential changes in regulatory practices in auction that could be made to improve the NSW real estate market. The current system functions to withhold certain information after the auction. In these regards, the auction purchaser is not revealed to other participants. In this auction environment, the lack of transparency makes it possible for sellers to collude in an environment that promotes an oligopoly in the housing market through restricting sales to potential buyers. As Zappone (2011) notes, the Sydney housing market has become the third most expensive in the world. Through increasing
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housing market had repercussions leading to worldwide recessionary trends because of globalization. It all started when financial companies started depending too much on the innovation in the blind faith that it will yield returns. The symptoms of the malaise started emerging in the US mortgage business first.
In mean time, speculators find their way in the market believing of making profits through short-term buying and selling. This drives to an increase in demand but at some point, demand decreases or stagnates with a subsequent increase in supply resulting to a sharp drop in prices (Baker, 2008).
Many authors have conducted researches to determine which sector is dominant in housing sector as well as to identify the primary reasons behind these changes. Some of the most renowned researched covering these aspects have been presented in the subsequent part of this paper.
Consequently, British households will benefit by a slight global warming. Because there are limited European studies conducted in this topic, comparisons are hard to find. Therefore, the results from this study can not be confirmed with certainty, or refused completely.
This is because housing consumes a large part of the income of a typical household.
Both prices and quantity of houses available in the market are determined by the construction sector and households. The availability of houses in the market is largely dependent on one main variable, that is, the demographic factors governing the place.
The housing market in the UK continues to be dramatically supported by that of historically low interest rates, low rates of house building, steady income growth, and of course, positive demographics; as well, "In our modeling, even very large (by recent standards) macroeconomic shocks fail to create a significant downturn in the market." (Cameron et al, 2006).
But such was not the situation a few years back when the US housing market was at a BOOM.Looking back at the period of boom for the housing market in US we see that the interest rates were low according to the policies of Alan Greenspan, chairman Federal Reserve.
An increase in the demand for houses led to the increase in the price in the housing market, this increase in demand also led to an increase in the demand for mortgages in the United States. As a result of the increased in prices of houses in the economy the buyers increased their demand for mortgages in order to gain from the low interest rates and also added value of the houses.
In order to make an investment, investors often reflect either risk averse or risk taking attitudes which depend upon their willingness to take the risks. Based on this assumption, investors rationally make decisions to maximize their returns and limit their risks.
Banks always ensure that the loan acquirers have sufficient bank deposits, and that their income levels are adequate to service the mortgage repayments.
The fluctuation in the levels of interest rates directly affects the housing affordability of aspiring homeowners.
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