Australian Property Market - Essay Example

However the interest rates have all along been one of the dominating factors in determining the demand and supply position of the residential properties, as the initial investment is heavy in the case of large residential property developments and the gestation period is also long to get back the investments. This paper analyses the impact of interest rates on the demand for residential properties. On an analysis it is found that the residential property market in Australia is getting stronger every year.

There are several factors that affect the growth of the property market in any country. It so happens that any factor affecting the residential property market in the major cities will follow course to smaller towns and cities and affect the country as a whole over the period. The prices of residential properties continue to increase during the period 2003 through 2005 in spite of a slight increase in the interest rates of up to 0.5 percent. However this increase caused a slow down in the property market in Sydney and Melbourne for some period, but the boom in the property market continued despite the increase in the interest rate.

The demand for the house properties remained strong during the period, due to the fact that the Gross Domestic Product of Australia in general remained stronger showing an enhanced progress of the economy. Similarly the support from the government in the form of certain tax cuts and other measures had improved the household disposable incomes and raised the consumer confidence. This also gave rise to the boom in the property market. Another factor that led to the increase in the demand for the house properties is the change in the general attitude of the people in getting the financial support form families making the purchase of property as a life time dream comes true.

But in spite of all these positive factors there was a decline in the demand. Analysts point out various factors responsible for this slowness in the property market. Though not the only reason, increase in the interest rates was cited as one of the factors responsible for the reduction in the demand for the properties. With this background I intend to present this paper reporting in detail the impact of interest rates on the residential property market in Australia. 2.0 Aims and Objectives:This research will mainly center around the impact of the interest costs among other factors on the demand position of the residential properties in the Australian property market.

To achieve the main objectives of the research study, the level of the interest rates during the historical period will be analysed and the demand for the residential properties during the corresponding period will be correlated to report the trend of the demand position on the basis of the changes in the