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HI5003 Economics for Business

Assignment 1

Topic - Demand and supply of Australian property market and factors (other
than price) which affect demand and supply.

By Homaya Anand
AA2236
14/01/2016
Table of Contents
1. Introduction .................................................................................................................................... 2
Demand:.............................................................................................................................................. 2
Supply.................................................................................................................................................. 3
2. Demand and Supply – Property Market ......................................................................................... 4
3. Article: Home price growth continues, but not because of supply shortage, say analysts –ABC
News ....................................................................................................................................................... 5
4. Factors affecting demand and supply – (Real Wealth Australia, 2016) .......................................... 5
5. Conclusion ....................................................................................................................................... 7
6. Reference ...................................................................................................................................... 11
1. Introduction

Demand and supply frame the most major ideas of financial aspects. The accompanying portrayals
(conventional economics) of supply and demand accept a perfectly competitive business sector,
reasonable buyers, and free passage and exit into the market. Economists likewise make the
disentanglement that all elements other than value which influence the amount of products sold
and bought are held steady. Business analysts contend this is a supposition on the grounds that
changes in cost happen considerably more rapidly than changes in different elements that might
influence demand or supply. Samples of these different components incorporate changes in taste,
changes in the condition of the economy and long haul changes limiting production, (for example,
the development of another industrial facility).

Demand:
The rate at which customers wants to purchase an item is known as 'Demand'. Financial hypothesis
holds that demand comprises of two components: taste and capacity to purchase. Taste - eagerness
for a good or service, decides the readiness to purchase the commodity at a particular cost. Capacity
to purchase implies that to purchase a good at a particular value, an individual must have adequate
wealth or salary.

Both elements affecting demand rely on flash price. A high price will imply lower demand and vice
versa. However, when prices are low, in general people need a limited quantity of product.

The bend in Figure 1, known as simple demand curve demonstrates a summed up relationship
between the price of good/service and the amount which shoppers are willing to buy in a given time
period.
Figure 1: This bend demonstrates the rate at which customers wish to buy an item at a given cost.

Supply
Eagerness and capacity to supply products decide the merchant's activities. At higher costs, a greater
amount of the goods will be accessible to the purchasers. This is on account of the suppliers will
have the capacity to keep up a benefit regardless of the higher expenses of creation that might
result from transient extension of their ability. In a genuine business sector, when the stock is not
exactly the desired stock, makers will raise both the supply of their item and its cost. The short-term
increment in supply causes fabricating expenses to rise, prompting a further increment in cost. The
cost change prompts expansion in desired production rate. The supply bend appeared in Figure 2
inclines upward on the grounds that each extra unit is thought to be more troublesome or costly to
make than the past one, and which in turn requires a higher cost to legitimize its creation.

Figure 2: At high costs, there is more impetus to expand good production.


2. Demand and Supply – Property Market
In property terms, "demand" essentially alludes to individuals or populace development. That
implies the higher the populace development, the higher the interest. Supply can be both the
measure of built up properties in the business sector and the measure of properties soon to enter
the business sector as new improvements. Markets can be in one of the three statuses: over-supply,
unbiased supply or under-supply. The most effortless approach to check whether a business sector is
in an over-supply or under-supply is to take a gander at the opportunity rate, or rate of empty
investment properties in connection to the aggregate number of properties in a rural area. On the
off chance that the figure is under 3%, then the business sector would be characterized as under-
supplied. On the other hand, in the event that it is more than 3%, it would be characterized as
oversupplied. (Business Spectator, 2016)

The future request and supply balance will manage cost falls or development. Financial specialists
ought to be acquiring in rural areas where there is prone to be a larger number of individuals than
property. This as a rule interprets into upward weight on costs and leases, and shows an under-
supply of property. (Business Spectator, 2016)

The following bar chart in Figure 2, shows the percentage increment in the property prices in past
one year while the chart in Figure 3, shows the median housing price in Australia wide in past year.

Figure 3: Percentage increment of property prices (2014-2015).


Figure 4: Median Housing price in Australian capital cities (2014-15).

3. Article: Home price growth continues, but not because of supply


shortage, say analysts –ABC News

In the course of recent decades, Australia's property market has experienced a few stages in which
outside powers have decided value development.

“These powers were laid out in a late paper by Reserve Bank market analysts Marion Kohler and
Michelle van der Merwe titled Long-run Trends in Housing Price Growth.”

In the course of recent years, national lodging costs have ascended by a normal of 7.25% a year. Be
that as it may, it has not been uniform. Value development has experienced three distinct periods.

The primary stage was in the 1980s when house costs ascended by a normal of 10% year. That might
sound noteworthy, yet the vast majority of the additions were eaten up by intemperate expansion.
In the wake of altering for inflation, house costs ascended by only 1.4% a year in the 1980s.

The enormous boom came in the 1990s and subsided in the mid-2000s. Amid that time, house costs
ascended by a normal of 7.2% year.

The last stage in the property blast and bust cycle considered by the business analysts was the
previous decade. Regardless of the late spike in Sydney and Melbourne costs, over this decade
house costs developed by a more humble 5% year – just a 2.5% yearly return after inflation.

4. Factors affecting demand and supply – (Real Wealth Australia,


2016)
5. Conclusion
6. Reference

Australians will be squeezed by the housing supply shortage | Business Spectator. 2016.
Australians will be squeezed by the housing supply shortage| Business Spectator. [Online]
Available at: http://www.businessspectator.com.au/article/2015/5/25/property/australians-
will-be-squeezed-housing-supply-shortage [Accessed 15 January 2016]

Home price growth continues, but not because of supply shortage, says analysts- ABC News
(Australian Broadcasting Corporation), 2016. Home price growth continues, but not because
of supply shortage, say analyst – ABC News (Australian Broadcasting Corporation). [Online]
Available at: http://www.abc.net.au/news/2015-05-01/home-price-growth-continues-but-not-
because-of-supply-shortage/6436790 [Accessed 15 January 2016]

Simple supply and demand will decide what happens next to Sydney house prices. 2016.
Simple supply and demand will decide what happens next to Sydney house prices. [ONLINE]
Available at: http://www.smh.com.au/nsw/simple-supply-and-demand-will-decide-what-
happens-next-to-sydney-house-prices-20151126-gl8z7o.html. [Accessed 15 January 2016]

5 External factors affecting Australia’s property market right now | Real Wealth Australia.
2016. 5 External factors affecting Australia’s property market right now | Real Wealth
Australia. [ONLINE] Available at: http://www.realwealthaustralia.com/5-external-factors-
affecting-australias-property-market-right-now/ [Accessed 15 January 2016]