FSA NEWSWEEK

2nd April 2021

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The Pain of Housing Gains: Australia's Rising Property Prices

 

Property prices are rising at a rate not seen since the late 1980s, as home values grew 2.8% in March alone. Sydney led the trend, climbing 3.7%, whilst Melbourne home prices grew 2.4%, fully recovering from the COVID-19 crash. All other capital cities’ markets grew by at least 1.5%.

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Tim Lawless, a research director at Financial services company CoreLogic, confirmed that the rate of growth achieved in the larger cities across Australia are starting to outpace many smaller cities which were previously leading growth. He believes that the high demand by buyers has fuelled the surge in prices, more than the low interest rates. The sense of FOMO or fear of missing out is one of the biggest factors to the heavy demand, Lawless notes.

This month combined capitals grew 2.8%, edging past the regional city index of 2.5%, signalling a reversal in the trend. Lawless believes this move is due to workers returning to work in the city and the demand for infrastructure in inner city areas. However, he still believes regional cities will have strong performance over the medium term.

Looking forward, it seems that the high growth of housing is unlikely to continue indefinitely and will most likely slow down by the end of 2021. Affordability would be the main concern as prospective buyers would simply not have the capital to participate in the market and risky home loans may become popular. 

The Australian Prudential Regulation Authority chairman Waynes Byres has stated that lending limits similar to those used between 2015-2017 may be introduced. However, there is no need for immediate alarm.

References:
https://www.afr.com/property/residential/national-house-prices-grow-at-fastest-in-32-years-20210329-p57exd 

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How Quantum Computing Could Change the World

 

As the 4th industrial revolution nears, several emerging technologies such as blockchain, AI and fintech have seen tremendous progress over the past few years. However, perhaps one of the most important and potentially lucrative out of these is the advent of quantum computing. 

 

Over the last century, computers have fast tracked technological revolutions in ways that have never been seen before. The world in 2021 is almost unrecognisable compared to how it looked a 100 years ago - and much of this has been possible due to the rise of classical computing and the technologies we’ve been able to develop as a result of it. 

 

However, classical computing (i.e. computing as we know it today), does have several limitations. Certain problems and algorithms simply cannot be solved - even by the most powerful supercomputers on earth due to their size and complexity.  

 

So how does quantum computing differ?

 

In classical computing, information is represented by individual bits that can either be a ‘one’ or a ‘zero’. In contrast, quantum computing uses qubits which can simultaneously be a one or a zero or both at the same time.

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To understand how this works in practice, think of a simple maze-like the one seen above. If you wanted to solve this with a classical computer, it would have to run different paths through the maze turn by turn until it finds the correct one. On the other hand, a quantum computer could run all these paths concurrently at the same time - and thus solve the problem exponentially faster. 

 

Therefore, qubits could theoretically allow quantum computers to solve complex problems, which would take supercomputers thousands of years, in a matter of seconds. This was recently demonstrated by a quantum computer built by Google which managed to simulate a chemical reaction in 200 seconds - a feat which would have taken a supercomputer an estimated 10,000 years!

 

Google’s experiment shows how quantum systems could potentially open up a plethora of opportunities within quantum chemistry that may lead to discoveries such as new life-saving drugs, improved fertilisers, better batteries, faster semiconductors, and an endless list of other materials. 

 

Moreover, quantum computing could revolutionise our artificial intelligence and machine learning capabilities whilst offering new ways to solve problems that require simulation of real-world scenarios. This could lead to breakthroughs in areas such as predicting financial markets, improving weather forecasts, optimising economic policy, and better understanding quantum physics. 

 

But there are some risks...

 

Provided they have enough qubits, quantum computers could break even the strongest encryptions in the world. This poses significant risks to not just individual privacy but the entire financial system, health records, government databases, and anything else for which encryption is necessary. If quantum systems do eventually become more accessible - and powerful - we’d need to rethink and reinvent our encryption methods to ensure that they are quantum-proof. 

 

Additional challenges 

 

Although it is extremely promising in theory, quantum computing is still a relatively new field with a long way to go before it can be used to tackle significant real-world issues. Quantum mechanics are complicated and far from being fully understood. As of yet, there has still been no ‘real’ quantum computer i.e. one which can operate independently of a classical computer. Rather the ones developed so far have always relied on some contribution from classical systems to function. 

 

However, the potential for growth is enormous - and this fact is not lost to the world. China is pouring billions into quantum technologies and education, with the aim to be the world leader in the field. Google and IBM are also in the race with each hoping to further expand commercial quantum technologies. As investment and education within quantum technology continue we could see it make leaps and bounds of progress over the next two decades.     

 

References:

https://www.wired.co.uk/article/quantum-computing-explained 

https://www.wired.com/2017/03/race-sell-true-quantum-computers-begins-really-exist/ 

https://www.scientificamerican.com/article/googles-quantum-computer-achieves-chemistry-milestone/ 

Consequences and Limitations of Conventional Computers and their Solutions through Quantum Computers, (Barde, Thakur, Bardapurkar, Thalvi, 2011), Leonardo Electronic Journal of Practices and Technologies: http://lejpt.academicdirect.org/A19/161_171.pdf

The views expressed within this article are those of the authors and do not represent the views of the Finance Student's Association. All images and references in this article are for fair and educational purposes only. The content in this article is not intended as legal, financial or investment advice and should not be construed or relied on as such.