The real estate market is inherently sensitive to monetary policy changes, a fact that has been evident in numerous past crises. In the current economic slowdown, can monetary policy be fine-tuned to stabilize the real estate market? This article explores the potential impact of monetary policy adjustments. The influence of monetary policy Central banks hold significant influence over interest rates, which, in turn, affect housing prices by influencing borrowing costs. Monetary policy adjustments can impact both short-term and long-term interest rates, subsequently affecting the rates for real estate loans. These fluctuations in borrowing costs directly impact individuals’ ability to afford homeownership. Historically, a thriving real estate market has contributed to growth in related sectors, particularly construction. Conversely, a stagnant real estate market can pose substantial risks to macroeconomic stability, financial systems, and overall price levels. Past financial and economic crises, such as the 2008 U.S. financial crisis, Japan’s turmoil in the 1990s, and the recent Evergrande crisis in China, all share common threads tied to the collapse of real estate bubbles, partly fueled by excessive credit expansion. Notably, housing prices in many developed economies have experienced significant growth over the years, a trend that was exacerbated by the Covid-19 pandemic. […]
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