Impacts of monetary policies on housing affordability in Australia
Liu, Junxiao and Liu, Chunlu 2010, Impacts of monetary policies on housing affordability in Australia, in AUBEA 2010 : Construction Management(s) : Proceedings of the 35th Australasian Universities Building Education Association annual conference, AUBEA, Melbourne, Vic., pp. A040 – 1-A040 – 14.
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Housing affordability has become a major policy issue in many countries across the world since the rapid inflation of house prices. This paper empirically investigates how monetary policies affect housing affordability in Australia from 1998 to 2009. Three primary variables associated with the housing sector and monetary policy, which are money supply, interest rates and house prices, are studied for all eight capital cities in Australia in this research. Shocks of such variables are identified by a structural vector autoregression (SVAR) model with restrictions that are consistent with economic theoretical framework. Based upon the analysis using the structural decomposition of impulse response on quarterly data, it can be discovered that the monetary policy plays an active role in housing affordability via adjustments of money supply and interest rates during the observed period in Australia. The empirical results from this research may be used for decision makers to determine money supply and interest rates from the perspective of housing affordability.
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