Demographic Profile of Sydney - Essay Example

Answer a) Pay back period: pay back period identifies the period of time when the revenues for a project have paid off all the costs. The payback period of a project is found by counting the number of years it takes before the cumulative forecasted cash flow equals the initial investments, and other financial costs that is to be incurred in the following years. For the current project pay back period is 9 years since – $[(6 -9) +(11 – 7)+ (14 -5) + (13 -3) + (8 -2) + (6 – 1) +(6 -1) +(6 -1) +( 6 -1) -42] Mill. = $(46 -42) Mill. = $ 4 Mill. The bracketed terms represent revenues net of financial costs starting from year 1 up to year 9, $42 Mill. is initial investment. b) Net financial return at the discount rate 5%: $[(6 -9)/ 1.05 + (11 – 7)/ (1.05)2 + (14 – 5)/ (1.05)3 + (13 – 3)/ (1.05)4 + (8 -2)/ (1.05)5 + [5 {(1/ .05) – (1/ (.05)(1.05)15)}]/(1.05)5 – 42 ] Mill.= $ 20.14 Mill. (Approximately) Net financial return at the discount rate 10% : $[(6 -9)/ 1.10 + (11 – 7)/ (1.10)2 + (14 – 5)/ (1.10)3 + (13 – 3)/ (1.10)4 + (8 -2)/ (1.10)5 + [5 {(1/ .10) – (1/ (.10)(1.10)15)}]/(1.10)5 – 42 ] Mill.= $ - 0.49 Mill. (Approximately) c) Net present value (accounting for public costs) at the discount rate 5% : $[(6 -9-4)/ 1.05 + (11 – 7-4)/ (1.05)2 + (14 – 5-3)/ (1.05)3 + (13 – 3-3)/ (1.05)4 + (8 -2-2)/ (1.05)5 + [3 {(1/ .05) – (1/ (.05)(1.05)15)}]/(1.05)5 – 42 - 3 ] Mill.= $ - 13.92 Mill. Net present value (accounting for public costs) at the discount rate 10% : $[(6 -9-4)/ 1.10 + (11 – 7-4)/ (1.10)2 + (14 – 5-3)/ (1.10)3 + (13 – 3-3)/ (1.10)4 + (8 -2-2)/ (1.10)5 + [3 {(1/ .10) – (1/ (.10)(1.10)15)}]/(1.10)5 – 42 - 3 ] Mill.= $ - 25.42 Mill. To calculate the present value of cash flows from year 6 to year 20, the formula for calculating annuities (an annuity is an asset that pays a fixed sum each year for a specified number of years) has been applied ( C [1/r – 1/r(1+r)t] where c is the net cash flow in each year, r is the discount rate, t is the number of years for which fixes sum C is paid in every year ). d) The presence externalities is the basic reason for why net benefit to society is needed to be identified rather that net benefit to private developers. External impacts use to be associated with any production process. The problem arises when the external effects are negative. Negative externalities causes harm to society. It costs society a lot, but the interesting point is that the producer, or the developer does not bear any costs for the negative externalities it generate. Private developers are only concerned about net financial return. They are bothered a little about social costs of its project. Therefore evaluation of any project needs to be done by calculating bet benefit of the project to society taking into account social costs of the project. (Lipsey, 1996) Answer 2: Demographic profile of Sydney: Census data of 2001 and 2006 provides some ideas about the current demographical status of Sydney and how demographical changes has taken place in the period of five years (2001 -2006) in this city. According to the 2006 Census there were 4,119,190 persons usually resident in Sydney (Statistical Division). Among total residents 49.3 percent were males and 50.7 percent were females.. Five years back, in 2001 there were 3,948,015 persons counted in Sydney, 49.2 percent were males and 50.8 percent were females. It implies within this five years there was a sharp increase in the population of Sydney. Things to be noted is that there occurred almost no change in the percentage of male and female in relation to total population. Another significant point is that in terms of percentage there is no significant difference in the amount of male and female population in relation to total population. (ABS Census 2001, 2006) In 2006, and in 2001, of the total population 1.1 percent and 1.0 percent were of Indigenous Origin, respectively. The three major sources of immigrants has been England, China and New Zealand. Significant numbers of immigrants also came from Vietnam, Lebanon, Italy, India and the Philippines. In the 2006 Census 19.5 percent of the population usually resident in Sydney were children aged between 0-14 years, and 22.5 percent were persons aged 55 years and over. The median age of persons in Sydney was 35 years. In 2001 20.2 percent of the total population were children aged between 0-14 years and 20.7 percent of total population aged 55 years and over. These figures provides a hint that population in Sydney is ageing. (ABS Census 2001, 2006) (ABS Census 2001, 2006) In the 2006 Census, 82.6 percent of persons usually resident in Sydney were Australian citizens, 31.7 percent were born overseas and 1.1 percent was a overseas visitor. In 2001, 84.3 percent of total residents in Sydney were Australian citizens, 31.2 percent persons were born overseas and 1.2 percent was overseas visitors. Most Sydneysiders are native speakers of English; many have a second language, the most common being Arabic (including the Lebanese dialect), Chinese languages (Mandarin and Cantonese), and Greek.According to 2006 census report, English was spoken at home by 64.0 percent of persons usually resident in Sydney . (ABS Census 2001, 2006) In the 2006 Census, the most common responses for religious affiliation for persons usually resident in Sydney were Catholic 29.1 percent, Anglican 17.9 percent, No Religion 14.1 percent, Eastern Orthodox 4.3 percent and Islam 3.9 percent. Situation in respect of religious affiliation of Sydney people was almost similar during 2001. The city of Sydney therefore basically shows a multi religious culture. (ABS Census 2001, 2006) Housing profile of Sydney: Census data also provides quite a clear idea about the housing pattern in Sydney. In 2001, there were 1,438,394 occupied private dwellings counted in Sydney (Statistical Division), 63.1 percent were separate houses, 11.3 percent were semi-detached, row or terrace house, townhouse etc, 23.9 percent were flat, unit or apartment and 0.8 percent were other dwellings. In 2006 Census occupied private dwellings increased to 1,521,465: 61.7 percent were separate houses, 11.8 percent were semi-detached, row or terrace houses, townhouses etc, 25.7 percent were flats, units or apartments and 0.7 percent were other dwellings. This clearly shows an increasing preference for flats and a declining preference for separate houses. (ABS Census 2001, 2006) (ABS Census 2001, 2006) In 2001, 39.0 percent of occupied private dwellings were fully owned, 23.7 percent were being purchased and 29.0 percent were rented, while in 2006, 30.1 percent of occupied private dwellings were fully owned, 31.1 percent were being purchased and 29.7 percent were rented. It clearly shows a declining tendency in having fully owned dwellings. Rental market for houses is growing slowly. (ABS Census 2001, 2006) In 2001 69.6 percent of the occupied private dwellings were family households, 21.3 percent were lone person households and 4.1 percent were group households. In the 2006 Census in Sydney, 68.1 percent of occupied private dwellings were family households, 21.6 percent were lone person households and 3.9 percent were group households. In Sydney family owned private dwellings is declining while private dwelling owned by lone persons is increasing. This is happening basically due to increasing number of single people. (ABS Census 2001, 2006) (ABS Census 2001, 2006) 2006 census also data shows that of the occupied private dwellings being rented 54.7 percent of dwellings were rented from a real estate agent, 17.5 percent were rented from a State/Territory housing authority and 26.7 percent were rented from an other landlord type, while five years back real state agents played much more prominent role in renting business with 61.9 percent, of the occupied private dwellings being rented being rented from a real estate agent, 15.3 percent were rented from a State or Territory housing authority and 20.7 percent were rented from other landlord type. These figures clearly reflect increasing participation of government in the housing market. (ABS Census 2001, 2006) Future trend: There has been a significant relative shift towards higher density housing in Sydney. And the rate of increase is speeding up. In Sydney majority of the new housing stock will be in urban renewal or infill developments, the majority of which will be in multi-unit form. In 2001 higher density housing stock was 35 percent of total housing stock. This higher density housing stock is expected to increase significantly in near future. Within a further 10 years the proportion of higher density housing could have reached half the total stock in Sydney. (Bunker, 2005) Regardless of its future role, the current higher density market is a distinctive one. It is predominately a rental market. In Sydney, , for those dwellings privately owned, majority of flats are rented from a private landlord. Unlike separate houses, not many flats are completely owned. In rental market, Semi-detached dwellings occupy a mid-way position between flats and houses. The role of the higher density sector as an investment market is clear from these features. (Bunker, 2005, Breheny, 1996) At the same time, the accommodation is overwhelmingly one or two bed roomed, In this case, only a minor proportion of total dwellings flats have three or more bedrooms. However, the case is completely opposite in case of separate. Both these features – the high proportion of rental and overwhelmingly small size of the accommodation, have important implications for the future recognition of this housing form as a mainstream housing option Answer 3: a) An externality is something that makes someone bear an impact that is not under their control. For example, a workshop in an urban area might produce both noise and smog effects on neighbouring properties. Externalities can be negative or positive. Problems are generally associated with negative externalities. A negative externality is something that costs producer or consumer nothing, but is costly to the society in general. (Lipsey, 1996; Marcus, 1994) Pollution is a very common negative externality.  Apart from pollution, in urban residential areas other negative externalities include crowing, traffic etc. Traffic congestion and chaos can make some cities less attractive than others. Congestion costs are a classic example of negative externality. Huge economic costs are associated with congestion mostly in the form of wasted work hours and increased air pollution. (Lipsey, 1996; Marcus, 1994) In Sydney, for example, air is continuing to make its people sick. The main cause of this is considered to be the increasing levels of ozone, volatile organic chemicals, nitrous oxide and particulate matters. Industries , and vehicles continues to emit these toxic materials in the air, and makes the neighbouring residential areas heavily polluted. As many people die in Sydney from air pollution as die in road crashes. The only difference is they die slowly, and away from public view. Thousands regularly suffer breathing difficulties, increased asthma and heart conditions. (ABS report on Environment issues, 2003) Sydneys beaches and rivers are also regularly polluted by sewage from the citys sewage outfalls and from storm water drains. The sewage flowing into ocean bathing waters is either raw or inadequately treated. Beaches has become unsuitable for swimming for a considerable proportion of time. Most of Sydney’s liquid industrial waste is disposed of via the sewers (Bernard, 1997). Noise pollution is also alarming in Sydney. Motor vehicles and heavy traffic are creating huge noise pollution. Apart from these, the people living near to airport are also experiencing huge noise pollution. Residents north of Sydney Airport are being warned to expect a dramatic increase in aircraft noise when east-west runway upgrades begins in October. b) In any country, governments basic aim is to force companies to internalize externality costs.  This means, for example, that if a companys pollution creates economic costs, then the government will force the company to pay that cost. To achieve its goal, the government uses one of several types of regulation (Lipsey, 1996;Marcus, 1994).  It can create pollution limits, tax companies for polluting, and introduce tradable pollution permits. The most widely used method of government regulation is direct control of pollution. A direct pollution control sets absolute levels of allowable pollution (Lipsey, 1996;Marcus, 1994). These levels may be applied to an automobile or to a factory. A natural solution to regulate congestion is to force drivers to internalise the negative externality, by raising the price of driving into busy areas by imposing congestion fees. ( Bowers, 1997) In Sydney, government has undertaken several initiatives to control air pollution. It has banned backyard burning. It has introduced unleaded petrol and catalytic converters on the cars and many other engine design changes, even though they increased the cost of the cars. These actions have actually resulted in some reductions of air pollution levels with both carbon monoxide and lead levels in the air falling significantly. As far as controlling water pollution is considered, new legislation has been passed which has canalized billion of dollars to fix this problem (Bernard, 1988). In Sydney, government is also imposing several toll tax for regulating congestion.. Government, for example, has imposed a Sydney Harbor Bridge toll tax of $3. (Bowers, 1997) c) Planning control for household development is needed to get rid of the problem of market failure and government failure to ensure proper development of housing. Through adequate planning government can avoid or correct problems of negative externalities, coordinate the delivery of public good, provide key infrastructure and services that may be under government control, ensure that systems of property rights are coherent and systematic. Government can derive several benefits from planning. For example, it can avoids future costs and losses (this is likely to be the key reason for planning), delivers additional services like the establishment of parks and greenways, can also coordinates services and infrastructure at lower cost. Planning is, however costly. First of all planning involves some direct financial costs. Apart from these direct costs, there are also some indirect costs of planning. These indirect costs include Increased complexity of government; transaction costs - costs of obtaining information, finding new opportunities, doing the transactions and enforcing agreements; deadweight costs on market operations - sometimes excessive planning can create a lot of barriers to innovation and enterprise. Apart from these, there some other problems associated with planning including principal-agent problem, coordination issues across different levels of planning etc. Answer 4. Land is priced through the mechanism by which different demands for the resource are sorted out. There are a lot of different types and uses of land. Within urban areas some lands are used for residential purposes, some for business purposes, and some lands are used by industries. Different uses face different kind of demand and supply. Many specialised markets for land reflect different supply and demand conditions. Accordingly prices of lands differ across different uses. Quite a lot of land is available for more than one use. Additional supplies of land can be competed away from different uses. Land price is determined by interaction of supply and demand for different uses. Thus it depends on the target group of consumers, which in turn determine the taste and preferences in the market. Economics has taught us the ceteris paribus rule where prices are inversely related to demand and directly related to supply. In case of a commodity like land or property where supply is more or less unchanged over a considerable period of time, it is demand, which more or less determines the price. In case of a simple demand function, price moves in the opposite direction to quantity demanded, however a structural change is undergone when the other parameters which were held constant for the simplicity of our analysis, are changed. This rather brings about a shift in demand curve to the right. Thus, for every quantity chosen previously, one has to pay more. Thus price increases for every commodity bundle or every unit of the commodity. Now, this will depend on the target group because consumers have differing purposes of use. Land is part of a combination of factors used for production. Demand for land is basically derived demand. Demand for land in any particular use is derived from its role in the production process. Demand depends on its productivity, price of land relative to other factors, price of the final product. As productivity for any particular use, e.g. in case of a particular industrial production, increases, returns from that particular use of land goes up, and as a result derived demand for land for that use moves up and interaction with supply transfers more land to that use. Productivity growth/increased returns can compete land resources to that particular use away from other uses. It reflects that increase in derived demand for land for any particular industrial / business/ residential use results in increase in the price of land for that use compared to its prices in other uses. Therefore, point to be noted the strength of the demand which is derived in nature, and the factors that are behind this strength contribute immensely to the variation in the price of lands its different uses. As far as use of land for commercial purposes is concerned, one needs to take into consideration commercial rent of land as well as commercial prices. Commercial rents reflect the payment that firms have to make to get access to land resource. Supply and demand forces in market set it. The demand forces need to be considered in terms of derived demand as mentioned above and the supply forces in terms of opportunity costs of different uses of land. Key opportunity costs for commercial rents include: Interest costs – normal to cover at least commercial interest on value of asset - values are higher in areas where there are lots of competing uses, risk premium – premises often are specialised buildings, may be vacant, entrepreneurship – rewards the provision of something special – e.g. shopping centre complex. As far as demand factors are concerned firms evaluate what it is worth to them to have additional land or premises. Firms take into consideration additional custom that they can attract, increased productivity at particular premises, availability of labour and synergies with other business operations. The opportunity costs of land as well the pattern of derived demand vary considerably in different uses. Therefore, commercial rent for land in one type of business use varies from the other business type, land price for residential use varies from that of any particular business use and so on. Commercial prices of lands are set in the similar fashion that is through the interaction of demand and supply. When one talks about commercial prices of land, land is then treated as an asset. Asset market is a little bit more volatile than the rent market. Asset market is Sensitive to a number of factors: stages in economic cycle, factors impacting on demand and supply, expectations. References 1. Australia Bureau of Statistics (ABS), 2003, Environmental Issues: Peoples Views and Practices, ABS Census Report 2001 and 2006 2. Bowers, J. 1997. Sustainability and Environmental Economics: An Alternative Text. . Singapore: Addison Wesley Longman. 3. Bernard, A.G. 1988. The Bacteriological Quality of Sydneys Tidal Bathing Waters, Proceedings of Water Quality & Management for Recreation & Tourism, International Conference, IAWPRC &I AWWA, pp46-50. 4. Breheny, M. 1996. Centrists, Decentrists and Compromisers: Views on the Future of Urban Form, in M. Jenks, E. Burton and K. Williams (eds.) The Compact City: A Sustainable Urban Form?. London: E & F.N. Spon. 5. Bunker, R., Holloway, D. and Randolph, B. 2005a. Building the connection between housing markets and metropolitan planning in Sydney, Australia, Housing Studies, 20(5). 6. Bunker, R., Holloway, D. and Randolph, B. 2005b. The Expansion of Urban Consolidation in Sydney; Social impacts and implication, Australian Planner, 42 :(3): 7. BURNLY, I. 2006. Sydney’s Changing Peoples: Local Expressions of Diversity and Difference, in Freestone, B. Randolph and C. Butler-Bowden, eds, Talking about Sydney: Population, Community and Culture in Contemporary Sydney, Sydney, UNSW Press and Historic Houses Trust. 8. Hodge, I. 1995. Environmental Economics.  New York: St. Martins Press. 9. Lipsey, R. G. and Courant, P. N.  1996. Economics.  New York: Harper Collins Publishers Inc. 10. Marcus, A. A. 1994. Environmental Encyclopedia. Detroit: Gale Research International Limited. Read More