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The aim of this report is to find out the impact of adopting design thinking on company’s profitability based on return on investment. The focus of this report is on service sector and specifically banks in Australia. The analysis would be based on three years period and attempt to answer the questions listed below:

Research Questions:

1.Does adopting design thinking have impact on profitability of the company (Banking sector)?

2.Will be any difference between different banks who have adopted design thinking?

3.Does the profitability of the bank positively change after adopting design thinking?

Definition of Housing Affordability

Housing affordability is a major challenge in the modern world. According to Burke, Stone & Ralston (2011), housing affordability refers to the financial capability of the individuals to purchase a housing unit with income that is below the median income level of the nation. In other words, affordable housing is those units of housing which the lower and middle income class, with income less the national median income, can purchase. With rising population in every country, housing affordability is a key issue across the world. The affordability of housing is dependent on the disposable income of people (Rowley & Ong, 2012). Hence, the economic growth and political stability are two essential conditions that influence the affordability of housing in a nation. The government must take responsibility to address the rising demand for affordable houses. The housing affordability is measured by Housing Affordability Index (HAI).  

The definition of housing affordability varies slightly in different countries, although the fundamental basics remain the same. As stated by Meen (2011), the choice of housing is a response to a severely complex set of social, economic and psychological impulses. For instance, some people prefer to spend more of their income on the houses, as they feel that they can afford the housing, while some other do not have the financial capability to afford a minimum level of housing. According to the recommendation by the United Nations and World Bank, housing affordability refers to the number of housing, which a household can afford with a certain percentage of the median income (Bredenoord, Van Lindert & Smets, 2014). Since, the economic condition and income ranges vary widely in different countries, the threshold for the certain percentage of the median income also varies. For example, in Canada and in the USA, the threshold of housing cost should not exceed 30% of the household’s gross income while that in India, it is 40% (Boeing & Waddell, 2017). 


Australia has been suffering from housing affordability crisis for a long time. Over time, the housing affordability crisis has grown multiple times in all over Australia, especially in Sydney. Chau (2018) reported that Sydney ranks second in the least affordable cities in the world, just after Hong Kong. The other Australian cities, that is, Melbourne, Adelaide and Brisbane are also in the list of top 25 least affordable cities. In Sydney, the housing prices are almost 13 times more than the median household income. Various reasons have been cited by the experts due to this housing affordability crisis in Sydney. The population has increased considerably in the past few years leading to immense demand for housing. Knaus (2018) highlighted that the government of Australia had introduced housing incentives, which failed to attract the property builders in Sydney, and in the past 8 years only 0.5% of the total housing was supplied, which did not solve much of the problem. The housing crisis in Sydney has resulted in a significant soar in the number of homeless people within a decade, from 33.9 per 10,000 people in 2006 to 50.4 in 2016. This result also indicates that the government’s efforts of tacking the housing crisis have failed. This crisis is leading to many problems and increase in the number of dependents in one such problem. Hunt (2017) showed in her report that the younger generation of Australians is deciding to stay as long as possible with their parents due to lack of affordable housing in the country. Thus, this crisis is responsible for creating a dependent generation in Australia.

Housing Affordability in Australia

The housing affordability crisis has severe consequences and implications on the Australian economy. The demand for housing is ever increasing while the supply is limited. As the population in Australia is growing rapidly, the excess demand for housing has been pushing the housing prices sky high. This has a severe impact on the first home buyers in Sydney. This research study will explore various aspects and implications of housing affordability crisis and its impact on the first home buyers in Sydney.  

The aim of the research study is to analyze the demographic and economic factors that contribute in the housing affordability crisis in Sydney and to find out potential solutions to control the significant growth in the housing prices.

The research objectives are:

  • To investigate the current average price of house or unit in Sydney as well as average income per year of first home buyers.
  • To examine the current price to income ratio to measure the level of affordability.
  • To explore other changes occur in the personal life of first home buyers due to housing affordability issues
  • To explore the possible solution to control the significant change in house price as well as other possible subsidies from government side

The research questions are:

  • What are the demographic and economic factors that increase the housing prices in Sydney and determine affordability?
  • What is the ratio of current housing price to income to measure the affordability?
  • What is the impact of housing affordability crisis in the personal lives of the first home buyers in Sydney?
  • What are the potential solutions to control the significant growth of housing prices in Sydney?  
  • What could be the possible subsidies from the government’s side that can help in controlling the price hike? 

This research study aims to conduct a detailed investigation on the housing affordability crisis that has been affecting the economy of Australia for long and has started to affect the communities. Thus, the researcher will present some meaningful insight about the social and economic factors that contributes in the increase of housing prices in Sydney and overall Australia. This is expected to generate some possible solutions to formulate strategies to control the housing price rise. The study will commence with an extensive and comprehensive literature review to create the background of the study. This will be beneficial to explore the factors that are responsible for housing price rise and the crisis. With this knowledge, the researcher can narrow down the focus of the study to investigate the specific factors that are relatively more important for influencing the housing prices.

The potential output of the study includes the knowledge on the factors contributing in the housing prices in Sydney and how the scenario has evolved in the past few years. The study will also highlight the impact of this crisis on the personal lives and financial condition of the first home buyers in Sydney. With this knowledge, the future researchers can investigate further on specific factors of housing affordability crisis and find out ways to handle those. It will also benefit the policy makers to get an in-depth insight about the impact of housing affordability crisis on the first home buyers in Sydney, and by applying that knowledge, policies can be formulated to ease their financial burden.

Housing affordability crisis 

Housing affordability is a matter of concern across the world. As the population is growing and economic conditions of average people are improving, the demand for housing is growing exponentially. However, as the supply of land is limited, the supply of housing is also constrained and this is resulting in excess demand for housing in the market and increase in the house prices. Thus, increasing house prices and decreasing affordability are creating a pressure on the economy across the world (Birrell & McCloskey, 2016).

Reasons for Housing Affordability Crisis in Sydney

Affordable housing can be depicted as the housing units which are affordable to the people having a median household income, that is, social housing. However, affordability of housing can be referred to as ability of people with a median household income to afford a housing unit. The affordable housing units come in various forms, such as, formal and informal rental, non-market or subsidized housing, indigenous housing, transitional housing, emergency shelters and lastly, affordable housing ownership. Thus, housing affordability refers to the relationship between various expenditures on housing, such as, rents, housing prices, and mortgages (aph.gov.au, 2018).  

The housing affordability is generally measured by the percentage of income of a household spent on housing expenditure (Mulliner, Malys & Maliene, 2016). Some experts also use the average hourly rate of the full time employees, who only receive the minimum wage, set by the regional, state or the central government. This is due to the idea that the full time workers should be able to afford a basic housing near their workplace. Thus, as stated by MacKillop (2013), housing affordability depends on many factors, income level and house price being the major ones.

Factors causing rise in housing price 

The factors that are contributing significantly in the housing price rise can be segregated into different categories. Bramley (2012) highlights that the factors include demographic shifts, demand and supply, shifts in the economic policies and public policies and innovations in the financial instruments. The demographic shifts include the population growth, population density, regional urbanization, increasing life expectancy and decreasing number of people per dwelling. The demand and supply factors include the psychological desire to own a home, and lack of land to increase number of dwellings. Income level, interest rate, availability of the housing finance, mortgage market policies and reduced profitability of other type on investments are the economic factors and taxes on new and old housing, zoning of land fall under the category of public policy regulations for housing. According to Tsai (2013), the factors that played significant role in Australia’s housing crisis are the massive growth in population, especially due to migration of skilled and unskilled workers from other countries, and the government subsidies and tax levies on the new housing. As per the report by Tacadena (2018), the undersupply of housing units contributed majorly in the housing crisis in Sydney and Melbourne. It was estimated that in the next two decades, Greater Sydney would require around 725,000 new homes for the ageing population. It was also forecasted that, Sydney would experience a population of around 1.74 million by 2036, while Melbourne might experience a growth in population of more than 10.1 million by 2051. Thus, it can be inferred that, the demand for housing is still growing and Sydney must take measures to control the excess demand in the housing market and increase the housing supply.

Impact of Housing Affordability Crisis on Australian Economy and Communities

Murphy (2011) showed in his study that global financial crisis had a significant impact on the mortgage and capital markets. The effects of credit crunch were mediated by the national housing markets and housing policies, and the regulations and activities of the local financial institutions. Although, the Australian economy was not much affected by the global financial crisis, the housing affordability faced inflation due to higher level of migration. The author found that Australia and New Zealand both took liberalization measures for the mortgaged markets but escaped the downturn like the USA due to initial regulatory institutional practices, stable economic growth and the government policies to shelter the markets. 


Income inequality is another factor that fueled the growth in housing market crisis. This phenomenon was evident in the USA. Between 1984 and 1991, it was found that in regions like East New York, the landlords experienced that after gentrification, people with higher income were willing to pay more than the standard market rate for better quality housing and thus, the rental prices increased rapidly, which in turn put a negative impact on the families with lower income level (Marcuse, 2013). The ad valorem property taxes along with the inflation in housing markets made it difficult for the lower income group to afford housing.

First home buyer and their benefits in Australia 

The Australian government has launched a benefit in 2000 for the first home buyers. The people, who are purchasing their first homes, are eligible to get a grant for first home owner. These grants are funded jointly by the Commonwealth and state/territory governments. Currently they get a grant of AUD 7000 for alleviating costs of entering the Australian housing market.

Randolph, Pinnegar & Tice (2013) conducted a study on the First Home Owner Grant (FHOG) in Sydney and its impact. The boost in the FHOG was introduced as a stimulus package for the housing industry, during the global financial crisis in 2008-09, as a reform of the initial policy of 2000. This measure was taken to control the destabilization effect of the financial crisis on the housing purchasing market. The authors highlighted that apart from stimulating the demand for housing, the government also aimed to support job retention in housing industry.

Effectiveness of government policies to control housing affordability crisis

Knaus (2018) reported that the Australian government introduced various schemes to control the housing affordability crisis. In one of the policies introduced in South Australia in 2005, it was mentioned that 15% of the housing in significant housing projects must be made affordable by rezoning in the urban gentrification and greenfield projects. This has led to the construction of 2009 housing units, and 3476 under making, which accounted for almost 17% of the total housing output in the South Australia. In NSW, the government introduced density bonus, an incentive scheme that offers the developers more floorspace in return for the affordable rental housing. However, this has resulted in only 0.5 to 1% increase in the total affordable housing supply.

Aim and Objectives of the Research Study

Gurran & Phibbs (2015) focused on the government’s intention in fixing the housing affordability crisis in Australia. They showed that only voluntary incentives schemes are not enough to handle the affordability crisis. According to them, the incentive schemes should be combined with mandatory requirements that can force the developers to construct more affordable housing in Australia.   

Research hypothesis

H0: Government incentive schemes do not improve the housing affordability of the first home buyers in Sydney

H1: Government incentive schemes significantly improves the housing affordability of the first home buyers in Sydney

Research methodology 

Research methodology represents the strategy of the researcher to collect, interpret and analyze the data to answer the research questions (Neuman, 2013). Research methodology is based on the nature, source and characteristics of the data and includes research approach, design, strategy, process of data collection and analysis. In the given study, the researcher aims to explore the factors related to the housing affordability crisis in Sydney and its impact on the first home buyers. To answer the research questions, the following methodology will be followed.

Research approach, design and strategy 

The researcher will follow the mixed methodology in this study, that is, both the qualitative and quantitative methods will be adopted to collect and analyze the data for the study. The topic demands an investigation on the numerical data on current and previous housing prices, the ratio of income and housing prices and comparative analysis of the financial factors affecting the affordability crisis. Primary qualitative data will be collected through focus group, consisting of 15 first home buyers in Sydney. Qualitative explanation is required to explain the findings of the numerical analysis with support from previous theories and research works on the housing price rise and affordability crisis in Australia. Deductive research approach will be applied as the researcher will be examining the research hypothesis based on the existing research works on the factors of housing affordability crisis and its impact on the Australian society and economy. Case study research design will be followed as that helps to narrow down the research subject and generate more accurate outcome (Lewis, 2015). The first home buyers in Sydney are considered as the case study subject for this study.

Data collection and sampling process

The researcher will conduct the research work based on the primary and secondary data. The primary data will be collected from focus group. The contact information of 15 first home buyers will be collected from a real estate company in Sydney and they will be contacted for participating in the research work. The researcher will give them a brief about the research topic and its purpose and they will be asked to participate in the focus group voluntarily.

Factors Contributing to Housing Affordability Crisis

Simple random sampling technique will be applied to gather the contact information of the 15 first home buyers from the real estate builders. This technique is a type of probability sampling and will be used as it minimizes the sapling biasness or sampling error in the data (Levy & Lemeshow, 2013).

The secondary data will be collected from various research works by eminent scholars, news paper reports, various government publications of data and reports on the housing affordability crisis in Sydney and in overall Australia, factors affecting the housing crisis and its outcomes, and financial and social aspects of the first home buyers in Sydney. Numerical files will be accessed from the government websites to get the historical data on housing prices in Sydney or in Australia. The theoretical information will be collected from the economic theories, books, journals, news papers etc. to support the numerical data analysis. 

Analysis of the data

Data analysis process will include both the quantitative and qualitative methods. The numerical data, that is, the income ratio, historical data on current and previous housing prices in Sydney etc. will be analyzed using necessary and relevant quantitative methods, such as, mean, standard deviation, cross tabulations, correlations etc. to get the trends in house prices and hypothesis testing. SPSS version 20 will be used for statistical data analysis.

The information gathered through the focus group will be analyzed using qualitative method. The theoretical data will be analyzed using qualitative methods, such as, thematic analysis. This process classifies the findings and information under different themes, framed to present and analyze the research topic in an organized manner (Braun, Clarke & Terry, 2014). The findings from the qualitative data will be used to validate the findings from the quantitative data analysis and answer the research questions. Thus, explanations will be based on the findings from both the numerical and theoretical data analysis.  

The research study will be organized in the following manner:

  • Chapter 1:This will present the Introduction. The researcher will present the background of the study and aim, objectives and questions of the research in this chapter.
  • Chapter 2:This chapter will include the literature review on various aspects of housing affordability crisis in Australia, demand and supply of housing, its consequences and impact on the Australian economy.
  • Chapter 3:This is the research methodology chapter, which will illustrate the method, adopted for conducting the study, in detail. This will include a comprehensive discussion on the strategies followed to collect and analyze the data, that is, research paradigm, research approach, strategy, design, data collection and analysis process. A project schedule and budget schedule will also be presented in this chapter.
  • Chapter 4:Analysis of the collected information and the findings from the hypothesis testing will be presented in this chapter. Discussions based on the findings will also be presented here.
  • Chapter 5:This is the last chapter, which will present the conclusion to the study and recommendations will be presented based on the issues found through data analysis. The researcher will explain whether the research objectives have been met and desired outcome has been achieved.

Project budget 

The allocated budget for the study is A$5500 and the given table presents the budget allocation for different tasks for the research purpose.

Purpose

Estimated cost (AUD)

Literature review (Collection of textbooks, journals, and online resources)

$1500

Primary data collection

$500

Secondary data collection

$2000

Numerical data analysis (Use of software)

$1500

Total

$5500

Project Schedule

Task Name

Duration

Start

Finish

Predecessors

Research project

65 days

Thu 11/15/18

Wed 2/13/19

   Designing the framework

5 days

Thu 11/15/18

Wed 11/21/18

   Literature review

10 days

Thu 11/22/18

Wed 12/5/18

2

   Data Collection

22 days

Thu 12/6/18

Fri 1/4/19

3

      Primary data collection through focus group

7 days

Thu 12/6/18

Fri 12/14/18

3

      Secondary numerical data collection

7 days

Mon 12/17/18

Tue 12/25/18

5

      Secondary theoretical data collection

4 days

Wed 12/26/18

Mon 12/31/18

6

      Creating concepts for appropriate research methodology

4 days

Tue 1/1/19

Fri 1/4/19

7

   Data analysis

20 days

Mon 1/7/19

Fri 2/1/19

4

      Quantitative analysis of numerical data

10 days

Mon 1/7/19

Fri 1/18/19

4

      Qualitative analysis

10 days

Mon 1/21/19

Fri 2/1/19

10

   Final report

9 days

Mon 2/4/19

Thu 2/14/19

9

   Thesis submission

1 day

Fri 2/15/19

Fri 2/15/19

12


Table 1: Project activities and schedule: Gantt chart

(Source: Author)

Figure 1:or 

References 

aph.gov.au. (2018). Housing affordability in Australia. Parliament of Australia. Retrieved from: https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook45p/HousingAffordability.

Birrell, B., & McCloskey, D. (2016). Sydney and Melbourne’s housing affordability crisis report two: No end in sight. Canberra: The Australian Population Research Institute.

Boeing, G., & Waddell, P. (2017). New insights into rental housing markets across the United States: Web scraping and analyzing craigslist rental listings. Journal of Planning Education and Research, 37(4), 457-476.

Bramley, G. (2012). Affordability, poverty and housing need: triangulating measures and standards. Journal of Housing and the Built Environment, 27(2), 133-151.

Braun, V., Clarke, V., & Terry, G. (2014). Thematic analysis. Qual Res Clin Health Psychol, 24, 95-114.

Bredenoord, J., Van Lindert, P., & Smets, P. (Eds.). (2014). Affordable housing in the urban global south: seeking sustainable solutions. Routledge.

Burke, T., Stone, M., & Ralston, L. (2011). The residual income method: a new lens on housing affordability and market behaviour. AHURI Final Report no. 176.

Chau, D. (2018). Australian property 'severely unaffordable', Sydney crowned 'second least affordable market'. ABC News. Retrieved from: https://www.abc.net.au/news/2018-01-22/australian-housing-unaffordability-experts-disagree-on-extent/9349796

Gurran, N., & Phibbs, P. (2015). Are governments really interested in fixing the housing problem? Policy capture and busy work in Australia. Housing studies, 30(5), 711-729.

Hunt, E. (2017). Australia's housing affordability crisis creating 'dependent generation' – study. The Guardian. Retrieved from: https://www.theguardian.com/australia-news/2017/may/08/australias-housing-affordability-crisis-creating-dependent-generation-study

Knaus, C. (2018). Housing incentives fail to ease Sydney's affordability crisis. The Guardian. Retrieved from: https://www.theguardian.com/cities/2018/apr/09/housing-incentives-fail-to-ease-sydneys-affordability-crisis

Levy, P. S., & Lemeshow, S. (2013). Sampling of populations: methods and applications. John Wiley & Sons.

Lewis, S. (2015). Qualitative inquiry and research design: Choosing among five approaches. Health promotion practice, 16(4), 473-475.

MacKillop, F. (2013). Sustainable as a basis of affordable? Understanding the affordability ‘crisis’ in Australian housing. Australian Planner, 50(1), 2-12.

Marcuse, P. (2013). Abandonment, gentrification, and displacement: the linkages in New York City. In Gentrification of the City (pp. 169-193). Routledge.

Meen, G. (2011). A long-run model of housing affordability. Housing Studies, 26(7-8), 1081-1103.

Mulliner, E., Malys, N., & Maliene, V. (2016). Comparative analysis of MCDM methods for the assessment of sustainable housing affordability. Omega, 59, 146-156.

Murphy, L. (2011). The global financial crisis and the Australian and New Zealand housing markets. Journal of Housing and the Built Environment, 26(3), 335.

Neuman, W. L. (2013). Social research methods: Qualitative and quantitative approaches. Pearson education.

Randolph, B., Pinnegar, S., & Tice, A. (2013). The first home owner boost in Australia: a case study of outcomes in the Sydney housing market. Urban Policy and Research, 31(1), 55-73.

Rowley, S., & Ong, R. (2012). Housing affordability, housing stress and household wellbeing in Australia.

Tacadena, G. (2018). Supply constraints worsen housing affordability in Sydney, Melbourne. Your Mortgage. Retrieved from: https://www.yourmortgage.com.au/mortgage-news/supply-constraints-worsen-housing-affordability-in-sydney-melbourne/252748/

Tsai, I. C. (2013). Housing affordability, self-occupancy housing demand and housing price dynamics. Habitat International, 40, 73-81.

 

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