write my assignment 11028

The RBA just scotched a theory about younger Australians choosing not to buy a home

Forget the perception that younger Australians are frivolous with their money, or that they now prefer to rent than buy.

The real thing holding Australian first time buyers back from buying a property is rapidly increasing house prices, says John Simon and Tahlee Stone, economists at the Reserve Bank of Australia (RBA).

Rather than a shift in ownership preferences or demographic changes in the years following the global financial crisis, Simon and Stone acknowledge that higher prices are largely responsible for crowding out prospective first home buyers (FHBs) from the market.

6. Using demand and supply analysis, how would the fact that young Australians now prefer to rent than buy change the price and quantity in the housing market (keeping all else constant). Briefly contrast the impact of a change in preference to the counter explanation that it is prices rising that is reducing quantity demanded for housing. Explain. (4 MARKS) – Maximum number of words 250