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Accounting for Longer‐Run Changes in Australian House Prices
Author(s) -
Otto Glenn
Publication year - 2021
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/1467-8462.12432
Subject(s) - economics , house price , covid-19 , monetary economics , medicine , disease , pathology , infectious disease (medical specialty)
Miles and Monro (2020) show a large proportion of the long‐run increase in real house prices in the United Kingdom is due to persistent, but unanticipated, declines in the risk‐free real interest rate. Applying their user cost method to Australia indicates longer‐run growth in real house prices is better accounted for by changes in the real mortgage rate than in the risk‐free rate, especially during the period 2004–2019. Declines in real mortgage rates during the COVID‐19 pandemic are consistent with long‐run growth in house prices in the range of 10–50 per cent.