Property Economics Real Estate Businesses Country

Question: Describe about the Property Economics for Real Estate Businesses Country. Answer: Introduction Housing prices have emerged to be alarming issues for the real estate businesses in every country. Currently, the high level of demand and limited supply of land has gradually increased housing prices that have become a notable challenge for any economy. Recently, a hike in the housing prices can be seen in New Zealand that has reduced housing affordability in the nation. The paper has been developed to argue on three government policies that control the price of real estate projects in the country to improve housing affordability. The first policy is to restrict credit to acquire property, the second policy is to increase taxation on capital gains and the third strategy is to incentivize to increase supply. The primary purpose of the essay is to argue which of the above mentioned policy will be effective in improving housing affordability. Hence, the study will present the economic concepts of the three policies and explain its impacts on the housing prices (Schill, 2005). Furthermore, the essay will present an argument for or against these policies explaining why they are effective in declining or improving housing affordability. Finally, a conclusion has been draw to recommend which of these polices must be implied by the government of New Zealand to improve the current status of the real estate industry. Argument It can be seen through study that the statistical analysis that the price of property is increasing in New Zealand with a high pace. It has become unaffordable for the people to buy houses due to high price and demand in the market. Furthermore, a fall in the supply can be seen in the metropolitan cities due to no place for new housing projects in the urban areas. A figure has been presented below for better understanding. Figure: Housing Price Index in New Zealand Cities Source: (Ghent, 2015) It can be seen from the above figure that the price index of houses has grown at a tremendous rate in the New Zealand cities. It has become a major issue for the government of New Zealand to balance the demand and supply in the real estate market (Ghent, 2015). Furthermore, there is a need of proper economic reform that will help the housing industry to economically balance the current problems. In order to improve housing affordability, the intervention of incentives to increase supply can be identified as the best solution to property economics. The fundamentals of supply- demand and pricing can significantly contribute to housing affordability in a target market. First of all, allowing intensification, the supply of housing can be improved. The intensification of land will allow more units per parcel of land for better affordability. As a single land parcel can be divided into more units, the supply of land can be improved surging affordability as well (Meen, Gibb, Leishman, Nygaard, 2016). Also, the increased supply will decline the prices so that more target demographics can be benefitted from the intervention. Understandably, more units per parcel of land can eradicate the supply of land creating market sustainability. Affirmatively, such interventions to increase supply have ensured better housing affordability. On the other side, the government can contribute to the incentives to increase the supply of housing by building state housing on a consistent note. Through the identification of fair housing reforms in the New Zealand market, comprehensive state housing development can surge the supply of houses to the target buyers (Beer, Kearins, Pieters, 2007). Moreover, the state property development projects of government agencies can create a positive impression of the housing industry promoting affordability of property in the market area. State housing development initiatives can increase the supply according to the demand putting the prices of property at a considerable check. Herein a graph has been presented to discuss the event on the basis of economic fundamentals. Figure: Increase Supply and decrease Price Source: (Margalit, 2006) The identified figure has been put to describe how the increased supply can influence the affordability of housing on a positive note. As shown in the above picture graph, the supply curve has been shifted to the right from S1 to S2 indicating the increase in supply. As a result of scenario, the price has declined from P1 to P2. Therefore, an increase in supply and lower price of land has contributed to the affordability of housing in the target market. Moreover, the intensification of land pricing has been utilised to create more supply of land. Instead of taxing capital gains, congestion taxes can be taken into consideration influencing costs of transportation to increase supply. Herein, the relation between influencing costs of transportation and increase supply of land is a bit complicated issue to be understood. The congestion taxes have been introduced by the federal governments to take control of the costs of transportation. Due to congestion taxes imposed of transportation, incentives to increase the supply of land can be improved (Meen, Gibb, Leishman, Nygaard, 2016). As a result of the scenario, the affordability of housing will be improved to a standard level. Under the congestion taxes, more lands will be available to the developers for property development. Thus, adequate properties will eventually deliver sufficient housing affordability to the target demographics. Subsequently, public transit development is another fundamental procedure to lead the supply of accommodation. Public transit-oriented development has been designed using both residential and commercial areas so that people of the area can utilise public transport for the maximum purpose. Such transit-directed development projects can be utilised to access remote locations so that the availability of lands will be improved. In this way, public transport modes can open up new property development areas increasing the affordability of housing. Such transits include railway networks, public transports and metro transits (Forrest, Murie, Williams, 1990). Also, government subsidiary is another effective part of increasing the supply of land. As the government has supported land projects on a regular basis, the affordability of housing will be improved day by day creating new opportunities for land and housing marketers. In this way, the identified incentives to increase the supply of land can contribute towards affordability of accommodation. Now, coming to the point of restricting credit, it is important to note that it will further reduce the housing affordability of the people in the New Zealand market. If the government add tax to mortgage interest, it will increase the expenditure of the people to buy a house or land in the country. Hence, it can be seen that the price of buying a house or land on loan will increase for the people that will further reduce the demand for the real estate properties in the market. The increase loan-to-value ratios will reduce the ability of the people to apply for borrowed amounts form the banks that will further reduce the capability of the people to purchase a property (Meen, Gibb, Leishman, Nygaard, 2016). Furthermore, the Debt to Income limits will also reduce the ability of the consumers to borrow money from the market. Hence, it can be seen that the restricting credit to acquire property will negatively impact the housing affordability of the individuals in New Zealand. On the other hand, if extra tax is incurred on the individuals buying house or lands, the cost of acquiring house will increase that will impact the demand in the market. But, it is important to keep in mind that the demand for housing property is inelastic in nature that shows a low amount of decrease in the demand as compared to the rise in the price (Quigley Raphael, 2004). But, there will be a fall in the demand for housing properties with the new policy of taxing capital gains. Hence, it can be seen that the policy will negatively impact the housing affordability of the people in the New Zealand market (Schill, 2005). Therefore, it can be said that the third options of incentives to increase supply is the most suitable policy for the government to increase housing affordability and improve the demand for the real estate market. Conclusion Through the identification of the given interventions, incentives to amplify supply have been clarified as the best possible ways to achieve improved housing affordability in the target market. The incentives to improve the provision of land have been analysed according to the fundamental of economics showing the impact on the affordability of housing. Primarily, allowing intensification has identified as one of the dominant factors to increase the supply. On the other hand, state housing projects and government subsidy in public transit development have largely contributed to improved supply structure of the land. Thus, the intervention has improved the housing affordability in New Zealand market. Conversely, the interventions such as restricting credit to acquire property and comprehensive taxing capital gains may force the pricing of the housing and real estate market to surge. In this way, the supply shortage of land can be seen. In this way, the other two interventions can creat e an adverse impact on housing affordability increasing the price by a considerable margin. References Beer, A., Kearins, B., Pieters, H. (2007). Housing Affordability and Planning in Australia: The Challenge of Policy Under Neo-liberalism.Housing Studies,22(1), 11-24. https://dx.doi.org/10.1080/02673030601024572 Forrest, R., Murie, A., Williams, P. (1990).Home ownership. London: Unwin Hyman. Ghent, A. (2015). Home Ownership, Household Leverage and Hyperbolic Discounting.Real Estate Economics,43(3), 750-781. https://dx.doi.org/10.1111/1540-6229.12090 Margalit, A. (2006). The Value of Home Ownership.Theoretical Inquiries In Law,7(2). https://dx.doi.org/10.2202/1565-3404.1133 Meen, G., Gibb, K., Leishman, C., Nygaard, A. (2016)Housing economics. Quigley, J. Raphael, S. (2004). Is Housing Unaffordable? Why Isn't It More Affordable?.Journal Of Economic Perspectives,18(1), 191-214. https://dx.doi.org/10.1257/089533004773563494 Schill, M. 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