This assignment is partly based on the attached article, “Australian Housing Market Review,” by Arnhem Investment Management, November 2012. Please read this article carefully before attempting the questions. You will be required to demonstrate your understanding of economic concepts taught in the unit and relate them to the cases in the article.
The article categorizes the market drivers into different categories and sub-categories. The main drivers include Demand, Supply, Pricing and Affordability. The demand side market drivers include demographics and ageing population, immigration and persons per dwelling. By analyzing the data of various economies, the author establishes that the population of age between 20 and 44 is a very strong indicator of housing demand and prices. Then, the author goes on to look at the population trend of Australia to predict the future trends in housing demand of Australia. The author also looks at the immigration trend which is adding to the population growth of Australia and will increase the housing demand. The last indicator on the demand side is the person per dwelling. Historically, the numeric value of this indicator has been decreasing starting from 4.5 in 1911 to 2.4 in 2006. However, the author is unclear about the latest forecast of this indicator which has shown an increase to 2.66 from 2.4. A very small change in this ratios could lead to a very bid change in the housing demand.Overall, on demand side, the author believes that the market will experience modest increase in demand, but it will disappoint the market forecasts if the persons per dwelling ratio do not go back to its historical downward trend.