IntroductionThe countries for which it tracks their economic health

IntroductionThe main purpose of this report is to analyse the article based information as the article issued by the International Monetary Fund (IMF). The article is about to the increase in the “new duty and land tax surcharges for foreign buyers of land in Australia”. It includes the main message from the Clayton UTZ article. Along with this, the economic concepts are also discussed with reference to given article information. In this article, Victoria, Queensland and New South Wales’s tax duty is evaluated in order to determine the impact of surcharges. In addition to this, the Melbourne’s housing prices are assessed in context of overvalued. Furthermore, the impact of surcharges over the residential property of Victoria is also determined in context of consumer surplus, housing equilibrium and total surplus. On the other hand, the housing policies are also discussed in relation to develop the housing market with the positive impact over the economy.   Question 1:The article is presented by the Clayton UTZ and the main purpose behind this was to entails the new duty and land tax surcharges by the Australian government if a foreign buyer is buying the new land and property under the nation coverage of Australia. Along with this, the major surcharges in context of New South Wales, Queensland, Victoria and Melbourne are also discussed as the property market of these states is on the boom stage and income of people is also increasing. At the same time, the impact of additional surcharges is also evaluated with reference to the foreign takeovers of the property. In addition to this, the applicable date of commencing the new duties is also determined for the different states of Australia. On the other hand, the economic concepts are also addressed in relation to the impact of this decision by the government.    The IMF is an international organization based in USA. It has 189 member countries for which it tracks their economic health by providing a yearly report which emphasize on stability, growth and economic policies of the country. The IMF country report no. 15/275 for Australia focuses on the increasing prices of houses in Australia. It has been argued in the report that when compared with the other countries the prices of houses in Australia are rising faster and are overvalued. From mid 1990’s an excessive increase in the price of the houses has been observed which has resulted in the increment of house price to income ratio. Australia has also topped other countries in exceeding OECD average. An overvaluation of 20-25 % in house prices is measured which is based on price to income and price to rent ratio. Due to the excessive increase in the house prices the liability to pay the interest on house loans has increased from 47% to 154% since 1990 which is three times in relation to the income of the borrower. However the counter arguments states that the starting period was assumed to be in equilibrium state and due to this reason the increased prices are considered to be overvalued which in actual only represents catch-up in the prices. If the house prices are compared on the basis of actual price of the house, the problem can be easily overcome. The income is usually 4 to 6 times less as compared to house prices and this ratio differs according to the type of the house. There is a consistent increase in price to income ratio when the whole country is taken into consideration while the prices are relatively higher in the coastal areas of the country. When income increases, more proportion of income is spent on household as compared to the overall increment in the income. This results in an increased price to income ratio. Though price to income ratio has crossed the OECD average in excess it is still comparable with its competitor countries. Conclusions of comparison between different countries become difficult as the income dispensed for household in different countries are different. The other counter argument is about the rising equilibrium level of house prices. It states that financial liberalization, lower interest rates and lower inflation have resulted in ease to avail credit and therefore resulted in higher levels of debts. This leads to the increased indebtedness and the prices of houses became higher relative to the income. The level of equilibrium changes overtime due to these policies and therefore it becomes difficult to compare the changes in house prices of different countries. Different approaches such as time series, user cost and trend approach are used because they are more analytical and explain the gap between estimated value from economic models and the actual house prices. By using these approaches in the time period where the transition was large i.e. 2000-2014 it was observed that the changes in house prices were moderate ranging from 4 to 19 percent. Though the population of Australia is increasing rapidly since 2000 still the residential investments are observed to be constant to 5% of the GDP. The report counter argues that most of the area in Australia is remote and the limited land is available for high density housing. This causes rapid increase in house prices and results in slow supply response on higher house prices. As the housing supply is slower than the demand it is right to say that the overvaluation concerns are reduced. Only in Sydney and Melbourne it was observed that the house prices have increased rapidly and not in whole country. Investor lending growth is stimulated due to low interest rates resulting in doubled new investor loans. While the lending standards does not seem to loosen anyway the LTV ratio remains stable to 58%.  Since 2011 the house prices has increased sharply in Sydney by 30%. Therefore it is only due to Sydney market that an increasing house prices are observed.The counter argument also states that APRA has developed two macroeconomic scenarios in collaboration with reserve bank of Australia. Under these scenarios 40% fall in house prices will be observed due to the decline in housing market in China. The cash rates will be raised by RBA for global growth which will significantly drop the house prices in Australia. The main message of the article is that the argument which states that the housing prices are increasing and overvalued in Australia is not valid rather the house prices are equally alike in comparison with the other competitor countries.   Question 2:Question 2:Melbourne is counted as a biggest and foremost city of Australia, where the housing prices are booming in the current housing market of the nation. Over the past year houses prices have increased strongly in Australia’s major cities in comparison to international housing market. Therefore, the housing prices are argued as overvalued in Melbourne in Australia’s current housing market. The changes in the housing prices in Melbourne are presented in the below diagram:(Source: International Monetary Fund, 2015)From the above diagram it is analyzed that the Sydney and Melbourne are major cities of Australia, where the housing prices are higher in comparison to other areas of the country. It is analyzed that the median dwelling/house prices will be higher during the financial year 2017 and expected that the growth will sensible for the remaining years in the forecasted time period. The actual and forecasted real median dwelling prices are presented in the below graph:(Source: KPMG, 2017)The above diagram is presenting that the dwelling prices in Melbourne are continuously increasing from the year 1996 in real terms. The analysis of KPMG report is presenting that the short-term factors have pushed median dwelling prices in Melbourne above their long-term dwelling prices by about 8% at the end of financial year 2016. Furthermore, it is observed that the housing prices in Australia’s major cities are influenced by different factors such as interest rates, population growth and building activities. These factors cannot affect to the house prices in isolation but they impact in grouping. If, these factors distorted moderately to their usual settings than they will lead to abnormal house prices. For instance, the increasing population growth and decreasing interest rates will increase the demand of new housed in the country. The increasing demand will lead to increased house prices in the particular area. In the same concern, it is analyzed the interest rate in Australia is lower and Melbourne is an attractive world city for the foreigners. Due to investor’s attractiveness and growing population the dwelling prices have been increased in the recent years. In addition, it is analyzed that in Melbourne the house prices have become more volatile and manifested without the same scale of volatility in demand, supply and cost variables (KPMG, 2017). In means that the stability in monetary policy and labour market makes the investment in housing more attractive as in these situations the market risk remains lower. In Melbourne, the median dwelling prices will be higher in next year. Median sitting in June 2016 was $650,000, which is expected to $720,000 by June 2019. It is estimated by KPMG that the Melbourne is Australia’s most overvalued market with 8% long-term equilibrium price, which is used as a measure how heavily the factors such as demand, supply, lending restrictions and investor activities will distort the housing market (Gilder and Sun, 2017). In this regard, it can be said that Melbourne’s housing prices overvalued in the current housing market as it is an attractive place for domestic and international people for investment and living purpose. Question 3:From the review of Article by the Clayton UTZ, it is determined that the Australian government has imposed the additional land and duty charges on the foreign property buyers. As it is determined that the residential duty tax in Victoria is charged as 5.5% from the domestic buyers but now the foreign buyers need to pay the additional land and duty charges increased from 3% to 7% which is very high increase in the tax rate. Along with this, the residential stamp duty is also increased from 8.5% to 12.50%. On the other hand, there is also fierce competition in the Melbourne housing market. (a) From the additional duty and stamp charges over the purchasing of property foreign buyers needs to pay the additional charge while purchasing the property in the nation of Australia. The foreign property buyers need to pay the new duty tax as they have paid the other tax while purchasing the land (Forlee, 2015). On the other hand, the equilibrium price of housing is also important where there is also a need to match the demand and supply of the house. In addition to this, the demand for the new houses in the Victoria, New South Wales and Melbourne is also increasing rapidly. With this, the economic concept is also applicable over the situation in Australia. The equilibrium of housing demand and supply would also be influenced asthe final charges need to be paid by the users of property not by the foreign property buyers. In relation to this, On the other hand, equilibrium is also reflective as midpoint between the paying capacity of people and the market price. In relation to this, the surplus of customer would also be impacted as the new foreign buyers might not be attracted towards the additional charges but it is animposition from the regulation of Australian government(news, (2016). The increased rate has also affected the rate of buyers property in foreign. Figure: Breakdown of foreign property buyers in year 2017(Source: ABC, 2017)Along with this, the housing turnover has also reduced from the expected rate. Australian property market downturn(Source: RBA, 2017)Furthermore, the consumer surplus and total surplus would also be influenced as the consumer might not pay additionaltax of stamp and duty as per the new law. The increased rate can also affect the buying power of consumer as the market price of the property will also increased as per the new tax and duty. On the other hand, the total surplus will also impactas the economic cost might increase and willingness price will also decrease. (b) The new duty and surcharges over the buying of property will also influenced the social welfare of the society. From the increased tax charges the Australian government will charge the additional amount from the foreign buyers so it will gain the extra amount and the government fund would also increase so the government can engage with the social welfare activities and can spend the some of its amount on the development of society of Australia (IMF, 2015). At the same time, the social welfare might not increase as the demand factor also works as it can influence the property market of Australia. It is totally different from the tax of property as it is concerned to the gaining ownership of property from the client. On the other hand, there is not analternative to sustain for the buying of property for residential purpose. With this, the property valuation of Australian market is also overvalued.  (c) As the government increasing the duties over the new tax on the buying of property in the Australian market. From the analysis of article it is determined that the government will collect the revenue higher as compare to the previous tax. The tax burden over the foreign buyers has also increased, so the government find will also increase. On the analysis of increasing the stamp duty, it is assessed that the tax revenue for Australian government will also increase. It will increase because the government will charge the additional amount as the stamp duty with the increased rate from 3% to 7% in Victoria (Grantthornton, 2018). At the same time, national wide people will be avoided from the collecting additional charges so it would be double benefit to the city government to gain the positive response from the local people. Further, it will increase with respect to the demand of housing property in the market as the demand will decrease the revenue would also be decreased.        Question 4:In Australia, housing is the fundamental for all citizens and the nation’s housing market has significant influence on the social and key aspect of the society. In social perspective, the housing policies are established to make the housing market stable and provide a stable base from which the nation’s citizens can get the benefits of housing requirements. Housing has also an impact upon the productivity, investment and participation in a saving trend in the country. Therefore, in an economic perspective the housing policies are made to support the nation’s economy. In this concern, the housing is known as central to the effectiveness of nation’s welfare system. The policies made by the Australian government to stabilize the housing market and economy are discussed as below:National Affordable Housing Agreement: In Australia, the government is working with the territories to restructure “National Affordable Housing Agreement (NAHA)” to improve the supply of new houses for the nation’s people across the housing continuum. Through this policy the government aims to make sure that all of the Australian have appraise to safe, affordable and sustainable housing to contribute in stable housing market and economy (Australian Government, 2017).Building Better Regional Cities Program: In Australia, the government recognized the policy of “Building Better Regional Cities Program” under department of social services. The aim of this program is to invest in the nation’s local infrastructure projects to support the sale of new houses and rent at affordable prices for the working families. Under this policy the working families on ordinary income level are provided affordable houses (Australian Government, 2017). This policy will be helpful in developing the strong economic society that will lead to nation’s economy in positive prospective.National Rental Affordability Scheme:This scheme was commenced in 2008 with the aim to increase the supply of new rental and affordable houses by providing the annual financial incentives to the housing service providers. From the analysis of above policies it is analyzed that the policy of “Building Better Regional Cities Program” is best policy to stabilize the housing market in Melbourne.  ConclusionFrom the above analysis of given article in context of increased duty and land tax surcharges in the Australian market from foreign buyers. The main message is to determine the impact of additional charges. Along with this, it can also be concluded that the Melbourne’s housing prices are also overvalued. On the other hand, it can also be said that the economic concepts are also discussed in context of given scenario. In addition to this, the policies such as national affordable housing agreement, building better regional cities program and national rental affordability scheme are also the policies that might support the government to stabilize the economy.