The Effect of Investor Credit Supply on Housing Prices

49 Pages Posted: 28 Jul 2021 Last revised: 23 Aug 2022

See all articles by Nalini Prasad

Nalini Prasad

UNSW Australia Business School, School of Economics

Christian Gillitzer

The University of Sydney - School of Economics

Date Written: June 2022

Abstract

What is the effect of investor credit supply on housing prices? We provide causal evidence using quasi-experimental variation in credit supply to investors caused by two macroprudential policies implemented in Australia. The first policy placed a bank-level cap on mortgage credit growth to investors. The second policy placed a bank-level cap on interest-only lending, which is predominantly used by investors. Both policies caused a large and sharp reduction in new investor lending relative to new owner-occupier lending. We examine the effect of these policies on the housing market using unit-record data on property sales and listings. We show that the restrictions on investor lending reduced the share of properties purchased by investors and reduced the relative price of properties in investor segments of the market.

Keywords: credit, investors, macroprudential policies, house prices

JEL Classification: E44, E5, G21, G28, R21

Suggested Citation

Prasad, Nalini and Gillitzer, Christian, The Effect of Investor Credit Supply on Housing Prices (June 2022). UNSW Business School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3894064 or http://dx.doi.org/10.2139/ssrn.3894064

Nalini Prasad (Contact Author)

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Christian Gillitzer

The University of Sydney - School of Economics ( email )

Rm 370 Merewether (H04)
The University of Sydney
Sydney, NSW 2006 2008
Australia

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