Contents

• Introduction 3
• Research Methodology 3
• Literature Review- Australian Residential Property Market 4
• Results 7
• Discussion of Results 7
• Price Rise due to Increased Demand 8
• Price Rise due to Reduced Supply 9
• The Effects of Rate of Interest on Demand 10
• Conclusion 12
• References 13

Description

Monetary policies of the central banks are reigned at either increasing economic activity or decreasing investments in any industrial sector by altering the interest rates. Australian residential property market has been witnessing phenomenal increase in demand as well as increase in the prices in the last several years. One of the reasons is found to be the substantial lowering of interest rates for borrowings by the Reserve Bank of Australia. The move of the Reserve Bank of Australia was aimed at increasing economic activity in the sector, which is not happening though. The reasons for the continued low economic activity in the sector are found to be reduced supply, increased foreign investments and increased negative gearing by the customers. The situation can be best understood by the analysis using demand and supply curves.