Analytical Report

Gedu College of Business Studies

Gedu, Chhukha.

Group Assignment Submitted by: Group 2

Kinley Wangdi ( 03220123 )

Kinley Wangdi ( 03220124 )
Kinley Wangmo ( 03220125 )
Nima Tshering ( 03220149 )

Common Foundation, Second semester, section D

22/03/2023
 DECLARATION

Module Code: ECN101 Type of Course Work: Group Task

Module Title: Microeconomics Module Tutor: Mr. Samten Jamtsho
Date of Submission: 22 March 2023

We hereby declare that this academic work is our own and those referred ideas from other
sources have been appropriately acknowledged. The material in this submission has not
been previously submitted for assessments. We understand that if found otherwise, our
academic work will be cancelled and no marks will be awarded besides legal
consequences.
Kinley Wangdi ( 03220123 )
Kinley Wangdi ( 03220124 )
Kinley Wangmo ( 03220125 )
Nima Tshering ( 03220149 )

FOR MODULE TUTOR

Sl. Marking Criteria Marks Marks

No Assigned obtained
1 Using the correct procedure and calculations 2% marks
2 Applying economic concepts to answer questions 4% marks
3 Drawing the correct conclusions 4% marks
Total marks

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Signature of Module Tutor

 Introduction

The rental issues in Perth had been a growing concern since last year and in December 2022 the
rental prices grew the most across all the capital cities. It is also an ongoing critical issue in Western
Australian’s rental market as the population goes on increasing where the availability of the properties
drops. (Brookes, 2022). The article highlights about how the rental property market is experiencing
high demands, which resulted to low vacancy rates and the ultimate increase in the rental prices.

Perth Rental Property Market

Today the Western Australia is having difficult time to offer rental supports to the citizens in its territory.
Perth is going under the worst scenario that they have hardly experienced before. As per the recent
data provided it is said,” the vacancy rate went down by 23% from October 2021 to october2022 and
today the vacancy rate at Perth has reached to 0.50%.” (Boer, 2022). With the shortage of rental
property, the housing rent have also increased from $500 to $505 in October 2022 and today it has
reached around $553. (Trigger, 2023). People over there are likely to face this problem until the rental
shortages have overcome. However, they have felt the risk of raising rent further and they are in
search of investors to provide housing in the market to keep rent affordable.

Determinants of demand and supply of Rental property

The demand for rental property in Perth is mainly influenced by the population growth, migration, and
economic conditions. As per the census figures, the Australian population continued to increase and
over the past five years its growth showed two million higher, despite the pandemic.
(BuyersBuyers:The better way to buy property, 2022). In addition, tourism influx and labor supply, the
foreign students returning to Western Australia, and over sea migration also added to the increasing
need of housing. Thus, these made the demand to rise significantly. Economic conditions like
increasing employment and subsequently increase in the incomes of the peoples residing in Perth
raises their ability to invest in housing. This rise in their affordability increases the demand for housing.
(SuburbsFinder, 2022). On the other hand supply for rental property in Perth is mainly affected by the
availability new buildings. According to The Australian Financial Review, the number of new homes
built across Australia is expected to drop by 25 percent by 2023 after the all-time high boom over
2015-2016 financial years. (SuburbsFinder, 2022).

Price
price
P1
P1
P
P

Q Q1 Quantity Q1 Q Quantity

Figure 1( Change in Demand) Figure 2 ( Change in Supply)

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In the figure 1 & 2, the demand curve DD intersects the supply curve SS. This point is the former
equilibrium price P and quantity Q of the Perth’s rental property market. The increase in demand due
to population will shift the demand curve DD to the right to D1D1, which will increase the equilibrium
quantity demanded from Q to Q1 and the equilibrium price to P1 from P. In the Perth’s rental property
market, the shift in demand curve will be mainly caused by population growth. On the other hand,
shortage in the supply of housing due to drop in the percentage of new built houses, it will decrease
the supply and cause the supply curve to shift towards left to S1S1 from SS. This will decrease the
equilibrium quantity supplied to Q1 from Q and the equilibrium price to P1 from P. The availability of
the new built is the main factor for the shift in supply curve.

Evaluation-Impact on Equilibrium Quantity

Referring to the figures 1 & 2, the high demand for rental properties due to population growth has led
to an increase in the rental prices as a measure to cut off the excess demand. In the same manner the
decrease in the supply also increased the prices further, which has resulted in a decrease in the
equilibrium rental quantity and increase in the equilibrium rental price. Therefore, the change in the
price due to change in demand for and supply of rental property increased the equilibrium price and
decreased the equilibrium quantity.

The increase in the rental prices will make the tenants to move out to other cities. There is other
related market or substitutes for the citizens of Perth. Other cities like Hobart with the rent $552 per
week and vacancy rate of 1.10% and Melbourne with the rent $507 per week and vacancy rate of
1.10% are going to attract people towards their market. (Trigger, 2023). This is because these cities
have comparatively lower rent and higher vacancy rates. Thus, the demand in Perth is likely to
decrease and the demand in these cities’ rental property market is likely to increase. While we see the
possibility of the affects that the substitute markets may accrue and then subsequently decrease the
demand, however, the rental prices in the Perth’s rental property market are not likely to fall back to
normal price. The drop in the percentage of new built homes is significant, and being unable to provide
adequate housing, the supply will remain low and the prices to continue soaring.

With reference to the Australian rental issues, what will be in situation in Bhutan? According to the
data provided by Foreign Minister Dasho Tandin Dorji,” there are 32258 Bhutanese in 113 countries.”
(TheBhutanese, 2023). It is also likely that Bhutan will further loose her people in following years.
Population, construction ability and the rental prices will be the main factors affecting demand and
supply in Bhutanese rental market too. If the population leaves abroad the demand for housing will fall.
Rental prices and the construction ability on the other had will decide the demand and supply
respectively.

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 References
Boer, A. d. (2022, November 02). Perth's rental shortage continues to push prices up. The Property
Turbine: https://thepropertytribune.com.au/market-insights/perths-rental-shortage-pushes-
prices-up/

Brookes, S. (2022, November 15). 'The worst I've seen it': The A to Z of Perth's rental crisis laid bare
in new data. WAtoday.com.au: https://www.watoday.com.au/national/western-australia/the-
worst-i-ve-seen-it-the-a-to-z-of-perth-s-rental-crisis-laid-bare-in-new-data-20221114-
p5by6g.html

BuyersBuyers:The better way to buy property. (2022, June 29). Census figures confirm strong demand
for housing. Buyersbuyers.com.au: https://buyersbuyers.com.au/articles/census-figures-
confirm-strong-demand-for-housing

SuburbsFinder. (2022, July 02). Factors Affecting Housing Market Supply and Demand in Australia.
Suburbsfinder.com.au: https://www.subrubsfinder.com.au/resources/factors-affecting-housing-
market-supply-and -demand-in-australia/

TheBhutanese. (2023, January 21). Foreign Minister says Bhutanese going to and coming from
Australia will even out in 5 to 6 years. Thebhutanese.bt: https://www.thebhutanese.bt/32258-
bhutanese-in-113-countries-to-foreign-minister-says-bhutanese-going-to-and-coming-from-
australia-will-even-out-in-5-to-6-years/

Trigger, R. (2023, January 11). Perth rental prices grew most out of all cities in December, Core Logic
data shows. abc.net.au: https://www.abc.net.au/news/2023-01-11/perth-record-strongest-
rental-price-growth-in-nation-/101844314