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Independent Review of the Housing Market in Sydney - Essay Example

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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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Independent Review of the Housing Market in Sydney
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Independent Review of the Housing Market in Sydney

Download file to see previous pages... 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 ...Download file to see next pagesRead More
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