Market Indicators and Economy Indicators-Free-Samples for Students

Question: Discuss about the dynamics between property market indicators and economy indicators, Evaluate and utilise those indicators to understand a property development or investment project. Answer: Introduction The report aims to discuss the basic elements related to property finance with the use of indicators such as GDP, confidence, inflation, employment, household wealth and property supply influencing the investor profit. Other aspects of the study have formulated a basic economic model. This structure has emphasized on the relationship of investor profit and economic performance and property performance. Such a model will be able to show the relation of investor profit which equates with the property indicators and economic indicators. The next important discussion has applied the model in the case study for construction of an airport in Western Sydney. The rationale for the construction of the new airport in this region is seen with increasing forecasted demand in the aviation services in next twenty years to a significant level. To relate the economic model in the given study the project has considered all the developmental activities which needs to be carried out near the airport. S ome of the main consideration will be taken with the commercial, industrial, and residential properties or a combination of them. The next stage of the stage has evaluated the economic model. The evaluation of the discussion is followed with the understanding of the dynamics among the economy indicators and market indicators. The evaluation of these pointers will be able to understand the link between property development and investment project. The important aspect of the description of the assignment is aimed to identify the market indicators affecting the construction of the new airport in Western Sydney (Akbaret al., 2015). Principles of property economics The principles related to property economics are associated with the supply and demand, anticipation, balance, conformity, externalities and substitution. The principle of supply and demand relates to the demand for an item due to the scarcity of the commodity. In general, a property with higher demand tends to bear an increased value. On the other hand, in case the demand for a property is seen to be low then the value will diminish accordingly. The principle of anticipation is inferred with the value of a property with future benefits. The future benefits normally take form of intangibles. This principle uses the increase in the value as per the anticipated benefits. For instance, if an individual purchased a property for $ 290,000 and similar property is available for $240,000, then an additional amount of $ 50,000 is paid for the anticipated benefits of the pool and not the cost. The principle of balance is considered with the property and environment in which the property is see n to be located. This consideration relates to the usage of land. This principle also states on the relationship between the cost of property, added cost and the value it can return. In terms of the optimum use of land, there would be greater instance of blend of land use. The optimum land use concept will be consisting of a mixture of apartments, single-family, contemporary shopping centres and nearby employment centres (Sinnett et al., 2016). The conformity principle is seen to be like balance but relates more to the characteristics of the real estate. It can hold the maximum value which is maintained with the aspects of reasonable conformity and non-monotonous uniformity among the properties. The main features of the principle of substitution relates to the decisions made by the real estate buyers and appraised as per the thought process of the appraiser. The substitution process is considered to identify the important elements of the various types of the other alternatives which is associated to satisfaction of similar wants, needs and desires. A prudent purchaser will be able to apply the various principles pertaining to the cost of building or buying another property. It needs to be observed that the effect of substitution can maintain the market balance. The substitution is based on the cost approach, sales comparison approach and income capitalization approach. The externalities principle is relied on the four major forces which are seen to be outside the property limits influencing the social, political, physical and economic boundaries. These concepts are depicted to be subjective in nature and action of buyers and sellers can maintain the values which are influenced by the forces which are outside the subject propertys boundaries (Cook et al., 2016). Some of the other important indicators affecting the value of the property is associated to the economic factors and non-economic factors such as interest rates and GDP. The increasing nature of GDP can state on the economic production of a region and the representation for the same is seen to be based on per capita basis. This consideration is useful in stating growth in the GDP and standard of living as the income rises. The confidence aspect is considered with the property decline, which is regarded considered as a critical indicator for the valuation of the property and several types of the other factors directly related to the valuation resulting in the reduced profits and price. In addition to this, the consumer price index is regarded as an important indicator of the property demand. In situations when there are inflation people are seen to restrict their spending decisions. Instead of the decision to spend the people often decide to opt for the strategy of saving. There have been several considerations which has shown the repercussions of real estate investment and its implications on the buyers properties which cannot be considered for sale. In addition to this, the significant considerations for the employment has a crucial role in maintaining stable property market. Unemployment is another important aspect which has a direct negative influence on the principles on the property market. In various situations, people may not be willing to pay their rents and mortgage amount. The implication of this is seen with considerable amount of increase in the mortgage sale along with a falling price in the property. In addition to this, certain aspects such as changes in the household wealth makes people to upgrade their lifestyle. The increase in the wealth is seen to be based on the different types of the important consideration for GFC savings (Pugalis Tan, 2017). Formulating a basic economic model The formulation of the economic model is identified with several types of economic and property conditions. The real investor profit is seen to be dependent on the various types of the factors such as interest rates, inflation, Gross Domestic Product and Foreign Exchange Rate. Henceforth, the main equation of the property is formulated: Investor Profit = Interest Rate + Inflation + Property Demand + GDP + Foreign Exchange Rate The main factors affecting the investor profit is considered for the formulation of the economic model which has combined the economic as well as the property related factors. In situations when there is an increase in the interest rate, the mortgage lenders are seen to increase the cost of variable associated to the mortgage payments. The higher rate of interest will make the purchase of the property look less attractive. However, from the investors point of view this is seen as a profitable venture. In Australia majority of the residents are depicted with a variable mortgage and even a small change in the interest rate can have a big impact on the affordability aspect of buying the house (Jennings et al., 2015). The property demand is critical in the formulation of the economic model. This is mainly seen with the fact that more is the value of the location, more will be the demand. For instance, the properties which are seen to be located beside a beach is more likely to be tagged with a higher price tag. The major landmarks such as airports calls for a premium price on setup of local business. This is due to the demand factor associated with the property (Pol, 2016). The deciding factor with the inflation is based on the element whether the property prices will increase or decrease in such a situation. In general, the increase in inflation rate is expected to drive up the prices of the property to a certain extent. These factors are evident with various types of the considerations which are seen to be based on the reducing spending power. Inflation has the power to dynamically affect the cost of credit (Shanahan et al., 2014). The essential costs such as food grains and rise in the petrol price is understood to be relied on the common mans income. It needs to be further seen that in Australia due to increase in cost of borrowing the income in most cases remained static and people wary for taking any kind of loan. This is mostly evident in case of house property. The natural reaction for the real estate developers will be able to consider the various types of the other factors which will be able to considerably affect the baseline factors for the investment purpose (Voyer et al., 2017). Due to the general characteristics of the increasing nature of the inflation the economic model has considered that any sort of increase in in the same would be conducive in increasing the overall value of the property. The understanding of the effect of inflation in the long term and short term can have a major impact on the prices of the property (Mitchell, 2016). The increase in the prices are seen to be based on the GDP as well. In case there is an increase in the price, then the wealth effect will be likely seen in terms of the consumer spending. This will lead to higher aggregate demand and expected to cause an increase in the real GDP and increased growth in the economy. The consumption spending on the housing services is able to bring more amount of gross rent and utilities paid by the renters. It is to be also understood that the owners imputed GDP has been long recognized with the standard practice in terms of the national income. The increase in GDP is directly related to the residential investment and the consumption spending on the housing service. This is a contributing factor for the different types of the services which are associated to the investors profit (Settre Wheeler, 2016). As per the construction of the economic model it needs to be considered that the Interest Rate, Inflation, Property Demand, GDP and Foreign Exchange Rate will be able to significantly have a positive impact on the investors profit. The formulation of the economic model is based on property factors such as demographics. This aspect is seen to be evident in terms of the migration which takes place with the level of population. The facilities such as parking, will also add to the property value. This is directly related to the property demand in the areas with major landmarks. The government policies and subsidies also play a determining role in terms of property demand and prices (Florec et al., 2016). Applying the formulated model to the project provided As per the given case it needs to be understood that the goods transport link is taken into consideration with the increasing aviation demand. The investment cost of the project is depicted to be higher than the existing airport projects. This is seen to be evident with airport length of 10.5 Km. The construction stage 1 will be seen with the increasing demand for the services and the goods in Western Sydney. In addition to this, the construction period is expected to generate an additional $ 1.9 Billion for the Western Sydney economy. The construction of period is also discerned to generate more than 11,000 jobs related to the service industry. In the early 2030s the proposed Western Sydney Airport is expected to create more than 29,200 jobs by the end of 2063 (Florec et al., 2016). The application of the economic model Investor Profit = Interest Rate + Inflation + Property Demand + GDP + Foreign Exchange Rate, is expected to ensure maximum amount of profit to the investment agencies planning to invest in the construction of the new airport. Based on the recent reports it needs to be understood that the banks are increasing the overall rate of interest for the borrowers. This is done mainly to lift the sale of the property. The connectivity of the airport will be conducive in terms of creation of new jobs and contribute to the overall economic growth of the country. This factor is seen to be beneficial for driving the property demand. As per the market point of view the total scope of increase in the interest rate is considered with a chance of 50:50 ratio and the increase of 1.75% from the current rate of 1.5%. The National Australia Bank are considering for increase in two rates by 2018. The forecast of increasing interest rate will contribute to the overall i ncrease in the investor profit (Florec et al., 2016). The effect of inflation on the property price is grounded on the tendency of currency to reduce the overall purchasing power. This consideration distorts the image of not only the individual assets but also economy. The effect of inflation in the property of Australia is directly related to affect the overall nature of the demand for the land (Miller et al., 2015). There have been several factors associated to the property factors, such as construction of the airport in 1,780 hectares greenfield site. The first stage will consist of a 3.7 km runway, which will be able to handle 10 million passengers. The factors are directly related to be associated to drive increase the demand of the airport. In addition to this, the property value at the site of the airport will relate to high quality transport connectivity. This factor is given with the fact that Australian and New South Wales Governments are investing in new transport connections through the $3.6 billion. The property factors have shown several types of the other increasing trend which is associated to handling of more than 82 million passengers every year (Roberts, Beckley Tull, 2014). The connectivity factors for the airport will be also considered with increasing property value. The property factors will be seen to be conducive in increasing the overall investor profit for the project. The changes pertaining to the Foreign Exchange Rate is seen to affect the overseas investors in the construction program. The Australian Dollar is highly volatile and prone to movement with 1% up or down in a single day. This consideration is seen to be depicted with the changes in the large currency transfers and can dramatically change in short period of time. A weak AUD exchange is depicted with a quicker sale of property, however from the investors point of view this is not seen to be profitable venture (Rimmer, 2017). Evaluation of economic model application The evaluation of the economic model application is seen with the benefits in terms of the environmental and the developmental requirements, preparation of the airport sites and airspace design. The evaluation importance is also understood to be conducive with the determining an Airport operator and developer. The consideration of the interest rate will be able to track the investors property as per the increase or decrease in the rate of interest. Moreover, the evaluation of the model is seen to be conducive in addressing the present situation of the property demand for the construction of the new airport (Florec Pannell, 2016). The several types of the positive aspects of the property demand is influencing the investors profit in the major way. Furthermore, the important considerations for the sustainability aspect is also able to reflect the Infrastructure Sustainability Council of Australia ratings, Green Star ratings and National Australian Built Environment Rating System. The changes in the foreign exchange rates will be able to contribute to the investment decisions made by the foreign investors. The construction of the airport is further observed to simulate the local economy in industries relating to aviation like retail, professional service, transportation and logistics. The economic impacts will be able to draw more amount of economic activity, population growth, and employment growth towards Western Sydney. This consideration is seen to be conducive in terms of the creating rebalance with the economic development in the Sydney region (McRae-Williams Guenther, 2016). Conclusion As per the discourse of the study, values of property economics are considered with the principles related to supply and demand, anticipation, balance, conformity, externalities and substitution. The formulation of the basic economic model is recognized to be considered with the combination of economic as well as the property related factors. In situations when there is an increase in the interest rate, the mortgage lenders are seen to increase the cost of variable associated to the mortgage payments. The higher rate of interest will make the purchase of the property look less attractive. However, from the investor point of view this is seen as a profitable venture. In addition to this, the applying the formulated model to the project is considered with the devising of the economic model which can combine the economic as well as the property related factors. 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