Question 3

By the end of the week, you've been asked to provide a recommendation to the investments team as to whether further investment into the banking sector should be undertaken. You know that Home Mortgage Loans are a significant proportion of Australian banking operations, so you decide to look more closely at these.

You will need to look at what is happening to both the Demand for residential housing in Australia and the Demand for Home Mortgage Loans so you can make a better-informed decision about the investment suitability.

It is a complex interaction and to improve your understanding and confidence in undertaking the recommendations to the investment team you need to do some research.

You decide to consider how the application of Monetary Policy theory affects the Supply of Home Mortgage Loans and also to consider the factors that are used in the Supply and Demand Model to explain the volume of Home Mortgage Loans.

Go to the link below and answer questions (a) - (d).

https://www.globalpropertyguide.com/Pacific/Australia/Price-History

(a)Find the graph that shows the impact of foreign investment on the level of 'Residential Real Estate Investment - Foreigners'. Briefly explain what happened to the level of foreign investment in residential real estate in Australia between the years 2013 - 2019.

(b)How will the change since 2015/16, affect the Demand curve for housing in Australia?

(c)According to the Supply and Demand model, what impact should this change have on both the price and the quantity of sales of residential housing in Australia?

(d)In the Supply and Demand model, it is always assumed that "other" factors do not change.Is it possible that the Demand for residential housing will NOT fall even if foreign investment decreases? Why or why not?