Question
Your friends are talking about how property prices rose after the central bank lowered interest rates, while property rents and expected rental growth rates remained
Your friends are talking about how property prices rose after the central bank lowered interest rates, while property rents and expected rental growth rates remained the same. Your friends have different explanations for why property prices rose. Whose explanation focuses on opportunity costs? Assume that all property market participants are rational investors. The opportunity cost argument for why property prices rose is that, as:
Select one:
a. Alice says it's now cheaper to borrow so people can borrow more and bid house prices up.
b. Brett says rental yields had to fall until houses were as attractive as bank deposits.
c. Carla says bank depositors became poorer so they could not pay as much for houses.
d. Dave-aroo says rent can be more easily re-invested than interest which makes houses more attractive.
e. Emily says: houses are more liquid than bank deposits.
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