The marking of any product is dependent on supply and demand. The same economics is being followed by Melbourne housing market. The threshold haul of underproduction that forces the costs to be increased in Melbourne has foregone in the year 1994. Presently, the demand is less than supply as depicted in the figure 1. It is because construction rate is lower compare to supply rate of 140,000. This additionally forces the costs to be lowered as clarified by last ten years’ price trend. It additionally depicts that it afterwards shows an increasing trend in the last decade except for2011 and 2012 because of the above described reason.It is clear that the cost has followed a downward trend in the past two years, yet the essential query is if the lowering costs can be afforded and if it is in the Melbourne citizen’s range per income or not. Let us provide an answer this question by taking the support of a number of economic dynamics. If we compare this with it income ratio, then we can conclude Melbourne price is higher by 30%.In comparison to other developed countries, it is amongst the highest.
Yet if a comparison on the nations on cost per square meter, it’s the lowest of all nations and can be afforded due to the greater average house dimension in comparison with other countries across the globe. The mean dimension is 243 meter square in comparison with Denmark’s 137 square meters which means it is one of the cheapest place to live.Next, if affordability is considered, we acquired that repayment as a portion of housing loan has not exceeded beyond the mean of last 3 decades. It reveals that Australian people can afford a new house. Nonetheless, if we do not take into account the adjustment in interest, the fig is alarming and is depicting that owning house is a major issue for people of Melbourne as proved by fig 4.It reveals that it increases distinctly in last 3 decades and sending it to one of the highest ranks as compared to its international partners. Let us throw some light on the housing affordability index, from the figure 5; we see that mortgage rate decrement has helped the increasing trend. This will surely better the interest of the investors and will force the increase in prices.