Economy Policy Analysis of the Government of Victoria (Research Paper Sample)
This research paper required the learners to analyse policies implemented in the Australian housing market industry. Some of the key policies that were to be analyzed include Changes in Stamp Duty, Shared Equity, Release of New Land in Growth Corridors, Proposed Changes to the Planning Scheme, Federal Tax Policy.
ECONOMIC POLICY ANALYSIS
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Changes in Stamp Duty
The government of Victoria recently introduced a policy of exempting the first-home buyers from paying the stamp duty. The policy only covers the property whose value is 600,000 U.S Dollars or less. However, those first-home buyers purchasing a home that falls between 600,001 and 750,000 U.S Dollars are entitled to a concessional rate of duty appraised on sliding scale CITATION Sta17 \l 1033 (State Revenue Office Victoria, 2017).
This policy initiative is meant to give the first-home buyers upper hand when competing with the non-first-home buyers and the investors in the housing market. Stamp duty is a tax incurred when purchasing a home CITATION Pre17 \l 1033 (Premier of Victoria, 2017). This charge usually raises the price of homes, and if removed then the price will decline.
According to the law of demand, the demand and price have an inverse relationship. As the price of product declines, the demand for that good increase CITATION Man14 \p 3 \l 1033 (Mankiw & Cosgrove, 2014, p. 3). Therefore, we anticipate many eligible persons to take advantage of the stamp duty changes to acquire houses. Therefore, the demand for homes will increase significantly.
On the graph one below, the growth in demand for houses resulting from the stamp duty amendment is illustrated by the shift in demand curve from D to D0. This change will lead to an increase in the number of houses demanded from Qe to Q1. Likewise, the price of homes will increase from Pe to P1. Therefore, for this policy to be successful, the government of Victoria should also put measures in place to increase the supply of homes in the market. The sellers of houses are also aware of this advantage that the first-home buyers have. They may tend to increase the property price for the first-home purchasers, and it would appear as if the money is being transferred from the state to the vendors. This situation shows that the competition authority of the country should to enhance transparency in the housing market by providing the necessary information to the consumers.
Graph SEQ Graph \* ARABIC 1: Increase in Demand
Number of Homes
The Victorian government has introduced shared equity opportunities to boost the efforts of first-home buyers in owning homes. The shared equity schemes include the 50 million U.S Dollars equity and Buy Assist – community shared ownership scheme worth 5 million U.S Dollars CITATION Vic17 \l 1033 (Victorian Government, 2017).
50 Million U.S Dollars Equity
Under this scheme, the government of Victoria will co-purchase dwellings with 400 first-home purchasers who meet the criteria for a bank mortgage, and yet they lack a big sufficient deposit. Instead of purchasing 100% home ownership, the qualified buyer will acquire only 75% of the value of dwelling while the government takes the remaining 25%. When the house is sold, each party will take the proportion contributed on the purchase. This scheme is limited to singles earning up to 75,000 U.S Dollars and couples with income up to 95,000 U.S Dollars and must have 5% deposit CITATION Vic17 \l 1033 (Victorian Government, 2017).
The buy-assist scheme will be managed by the National Affordable Housing Consortium. The purpose of this initiative is to assist the low and mid-income households in securing a foothold in the real estate market. This plan has same eligibility criteria like the 50 million U.S Dollars equity. However, it is private sector-based model incorporating a partnership with the property developers.
Evaluation of These Plans
If well implemented, these shared equity plans avail enormous opportunities that can be exploited to reinstate the housing affordability crisis in Victoria. For example, the buyer-assist incorporates collaboration with private sector and thus minimizes the possibilities of the owners hiking the prices. The schemes can be more successful if the government devises measures to guarantee a balance between the supply and demand for accommodation units.
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