Between a Rock and a Hard Place: Economic Sustainability Challenges of the Housing Market. Case of Australia

The housing market plays an important role in any economy, and it is quite often the source of economic concerns. Right now, due to the rise of interest rates across the world, including in most European countries, the US, Australia, and Canada, the concern about the housing market’s financial sustainability is one of the most debated economic problems. In this paper, we investigate the mutual interdependence of supply, demand, housing prices, and mortgage loans in Australia. The main goal is to test if simple market logic, where demand drives supply, can be applied to the housing market while simultaneously evaluating the impact of mortgage loan rise on this market. Our research provides valuable insights for understanding the complex behavior of the factors, with a set of rather surprising results.