Australian Housing Crisi Ver1

Part One: A brief on the Housing Industry

• Big demand for housing and rental properties

In Melbourne today there are not enough housing properties to go around providing all Melbournians. The shortage of skilled labour and workers in the architectural and building industry means a big decrease in the Australian dream of owning a home.

• High Interest rates on mortgages

The Reserve bank of Australia has risen interest rates on twelve consecutive times in a row. The Age: Interest Rate Statistics has shown that interest rates in 2001 were around 6.05%. (For example a $300,000 home would pay $1942.08 extra). On February 2008, the rate had risen to 9%. (Now the buyer would have to pay $2517.59 extra).

• Inflation (Goods and Services value, going up)

Goods and services such as Petrol, milk and power are increasing their value overtime. The economy is simply going too fast which is causing inflation to explode our needs and wants up in value. The Reserve Bank of Australia has risen interest rates to slow down the Australian Economy and tackle inflation.

• Victorian Population Increase

The City of Melbourne is expanding at least 1,500 civilians every week (Herald Sun: 4/3/08, More land for homes). Premier John Brumby of the Labor Party of Victoria, has opened up blocks of land to expand the urban development zones in Melbourne.

• Negative Gearing

Currently there are problems with first home buyers competing with rental investors in buying their homes. Rental investors are pushing first home buyers out of the competition. The Age: Government Propsals (4/3/08) has shown statistics in an increase on rental investors buying more properties than first home buyers. Therefore first home buyers wouldn’t have enough money to repay the bank while the rental investors can due to the interest rate rises.

• Insufficient skilled Labour

On the Herald article вЂ" Our growing pains (5/3/08) on Premier John Brumby’s speech, he wrote: “we lead the nation in jobs creation, training and apprenticeships, housing starts, building approvals...”. Since there isn’t enough skilled labour for architecture, it questions his speech and government.

Part Two: A more thorough analysis on the Housing Market

• Big Demand for housing and rental properties

The Age: Home ownership dream drifts further into the distance, 4/3/08, enlists that the Australian dream of owning a house is getting harder than ever. More and more home investors outbuy properties against first time home buyers. The Reserve Bank of Australia has risen the interest rate rise in twelve consecutive times in a row. Since there are not enough skilled workers in the architectural industry, this means that home builders are on the decrease. The increase of the Victorian population by 1,500 citizens a week (Herald Sun, New Land Rush - More land for homes: 4/3/08). Household numbers have dramatically increased as the Victorian, Labor-run government tries to fix this problem by expanding the urban growth boundaries.

• High Interest rates on mortgages

The Reserve Bank of Australia has risen interest rates twelve times in a row. As first home successful buyers try to pay back their mortgages, they now find it harder to repay the extra interest. The interest rate of today is accurately 9%. As the Herald Sun says on New Land Rush article (4/3/08), Premier John Brumby of the Labor Party has opened up new blocks of land in the outskirts of Melbourne. As this method is believed to decrease home expenses, as surveys found out that the average family has to pay 37.4% to meet their mortgage repayments. As seen on an newspaper article of The Age, a person paying $300,000 for their home (4/3/08), has just to pay $1,942.08 in interest. But since the twelve consecutive rate rises, the interest has increased from 6% to 9%. So therefore the person has to pay $2,517.59 in interest now.

• Inflation

As employers generally increase their worker’s wages, inflation is known to critically rise goods and services values higher. The Rudd Government has tried to push down on inflation by penalising fuel companies about Petrol issues, public transport fares increasing (Herald Sun: Our growing pains, 5/3/08), etc. But the cost of essential needs of living has gradually risen and is becoming harder to stick to a family budget.

• Victorian Population Increase

Melbourne is known to be increasing its population by at least 1,500 citizens each week according to the Herald Sun (4/3/08). But the newspapers say that Melbourne may outgrow Sydney in the future. Although this situation does familiarize and is related to the housing crisis, the housing for the large population of Melbourne is at shortage. Premier John Brumby has decided to open up blocks of land to expand the urban growth limits. As seen on the article: New Land Rush вЂ" 4/3/08, the boundary has expanding to Melton, beyond Werribee, Plenty Valley, Hume, Epping North, beyond Cardinia and Pakenham and Cranbourne. The government hopes that expanding the urban growth boundary can reduce house and land prices, and minimize the housing crisis.

• Negative Gearing

This is a situation against first time home buyers and home rental investors. As home rental investors back first time home buyers against the wall, it seems clear that the newcomers are being knocked out of the competition. Since that investors are also a problem to the housing crisis, it is likely that they could repay the loan taken out from the banks.

Part Three: An evaluation on the Victorian Government proposals

Proposal 1: Release Surplus Commonwealth land for new housing

The Rudd Government (currently in office for 2007-2011), has decided to put this idea forward. Also they have commented that this will be highly unlikely to