Housing market effects on the economy

Introduction

Why is housing important to the economy?

In a city like Sydney, housing drives the economy, and a slump in housing impact the economy seriously. Since the year 2000 house prices have risen and risen. The experts said that it wouldn’t last but it has, and 20years on in the middle of a global pandemic prices are still rising.

Why Housing is Important to the Economy

People flock to major cities to work, and they all need somewhere to live. One of the reasons for the strong growth was sustained and relentless immigration causing our cities to grow and grow. In the year 2000, the population of Australia was 19.5 million.

In 2020 it was 25.5 million. To be able to get work most people need to live in a major city. This cuts out Adelaide and Hobart as their economies are nonexistent and only support certain skill sets. So the burden of infrastructure and housing falls on the other major cities primarily Sydney, Melbourne, Brisbane, Perth, and Canberra.

How Does GDP affect Real Estate?

The overall health of the economy affects the value of the real estate. So if the economic indicators are unfavorable, unemployment will rise and this, in turn, will lead to a market slowdown or fall. Interestingly, in the recent pandemic, the market slowed for nearly the last year but now appears to be rising again. The development of the real estate industry is extremely important to the economy and livelihood of nearly everyone.

Is Rent in GDP?

Rent minus depreciation counts as consumption and is part of GDP. All activity is measured and tracked in the GDP quarterly figures.

Is it OK to buy a 100-year-old House?

Renovation or Renovations keeps the wheels of the economy turning. If you buy a house that is 100 years old, you will need to strip it back, rebuild, and make it fit for purpose. Remodeling and restructuring account for between 3-5% of the GDP, including brokers’ fees.

Is it better to Build or Renovate?

This is a personal choice, but if your budget allows it is great to rebuild and have everything new. Some of the amazing house and land packages available are such great value, but you have to go out of the city a bit to get value. To many people, remodeling and renovating are a better option as it helps them to remain near to jobs, schools, and amenities.

How much Should I Spend to Remodel?

Before you bought your lovely old house, you would have had the building inspector in, and worked out what the priorities were to make it livable.

I would normally spend around 10% of the total value when renovating an old house. Sometimes you run into unforeseen problems and this can be costly. If you are renovating your ‘forever home’ it probably won’t matter, but if you are renovating to sell every cent counts, so try to stick to your renovation budget. Also, my figures are based on a rising market, a falling market would mean less to spend.

How Do People Survive Home Renovations

This can be seriously difficult especially with pets and children. As long as you have a bathroom you will be OK. Just set up in one room with a fridge and microwave, and if you can’t cook for six months, you will manage. prepare simple microwave dishes, and make use of the outdoor barbecue. Try not to renovate in mid-winter, and if you have to, eat takeaway. Staying in the house allows you to supervise the builders, and is a big cost saving on moving out. Some people even move into the garage for the duration of the renovation, and this is a good option for a couple.

How Does Construction Help the Economy?

The construction industry produces about 9% of Australia’s GDP and generates around $360 billion in revenue, this is huge considering the industry is heavily regulated.

What are the Economic Impacts of Events?

Historical events, like wars, had a massive impact on the economy. Today we are awaiting the economic impact of COVID-19 and the financial impact has already affected many people. The government has spent huge amounts on stimulus packages and this will have to be repaid down the track.

How Does Construction Affect The Economy?

Construction is the third-largest industry in Australia, in 2019 the industry employed 1.15 million people, 9% of all jobs. So in order for our economy to survive it is important that construction remains strong.

How much does Construction Contribute to GDP?

Construction contributes around 9% to GDP. Only healthcare outperforms construction.

What Percentage of the Economy is Construction in Australia?

The three sectors of the construction industry are vitally important to the economy delivering up to 10% of GDP.

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