Reference no: EM132139629 , Length: word count:3000

Assignment -

Topic - Recent years have seen rapid development in Australia's housing market. The effect of high housing prices on Australian families is enormous. Despite those challenges, you would like to buy 3-bedroom house for you and your family. You are considering houses either in Newcastle, Sydney, or Hobart. In this assignment, you are required to prepare a report to discuss the process undertaken when making probably the most significant financial decision most individuals do in their life. Address and discuss the following issues surrounding this financial decision:

1. Describe how the market for real estate has developed in the three cities over the past 30 years. Use a plot to illustrate your findings. How did housing perform in comparison with other investment types, such as stocks or bonds? In a second chart, compare returns of real estate versus Australian stocks and bonds. Research a useful metric for comparison. Discuss: If you find different performances - try to explain what may explain those differences. Do they make sense?

2. Research one property per city that meets your requirements:

a. 3 bedrooms

b. 1 car park

c. 2 bathrooms

d. At least a small garden.

Compare prices of the three houses and research mean income levels in those three cities. What is the ratio of house price to income level? Note: If you would like to look mean income levels, pick one of those professions: Financial planner, architect or lawyer. Do you find differences across the three cities? Discuss.

3. Research how mortgages work. Research conditions for mortgages with an Australian Bank of your choice, given the assumptions of your professions in question 2. Make a plan in Excel where you calculate the following for each of the three houses (assuming you have saved up 30% as a down payment):

a. Required repayment per month for a 20 vs. 30 year mortgage.

b. At the end of the mortgage, how much will you have paid in interest?

c. Calculate for each option how much money you would have available every month after the repayment.

4. Assume that instead of investing in a house, you consider taking your saving and invest it in Australian shares or Australian bonds. For this purpose, research annual mean returns of each (real estate, stocks and bonds) over the past 20 years, and use those figures to make forecasts. Compare how your financial situation may look in each scenario: Owning a house, stocks, or bonds. Present your findings in a table and discuss if you believe those figures are reasonable.