Procurement is one of the biggest contributors to falling housing prices in Australia, according to Australia's central bank governor Philip Lowe.
The country is facing a downturn in real estate. Lowe said that over the five years up to 2017, Australian real estate prices have risen by nearly 50%. Since then, stocks have fallen 9% and returned to mid-2016 levels.
The reason? The population grew significantly in the early 2000s, and it took almost a decade for the pace of house building to pick up.
"It took time to plan, get board approvals, organize finances, and build new homes – unsurprisingly, house prices have gone up," Lowe told the Australian Financial Review's Business Summit .
Lowe said that when the offer finally arrived, the values ​​had to meet the supply again.
Favorable conditions for foreign and domestic investors also contributed to the fall in prices. Financial conditions have become more difficult recently.
"Only 10% of people borrow the maximum that is offered to them.Mostly, most people borrow less than what is offered to them, so the effect of this reduction in the ability borrowing has not been particularly important, "Lowe said.
However, in a much broader context, rising and falling home values ​​have a wealth effect on the economy.
According to an RBA estimate, the level of consumption increased by 0.75% in the short term and 1.5% in the long term, which corresponds to a 10% increase in net wealth in dwellings.
The Australian Financial Review reported that the purchase of motor vehicles and furnishings was the main impact of rising household wealth.
However, Lowe argues that real estate prices are not as important for consumption as household income.
"My conclusion here is that wealth effects influence consumer decisions, but they act primarily on future growth earnings forecasts. Fluctuations in housing prices and turnover in the housing market also have an effect, but they are not the main problem, "said Lowe.
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