my name is Nick and I'm from Sydney, Australia.
In the last 5 years, our big cities such as Sydney and Melbourne has experienced rapid property price growth, they went so high and so fast that Sydney has been catapulted to top 5 least affordable cities. This rapid price growth has been accompanied by the extremely high quantity of mortgages issued by the various private banks, in fact, Australian banks are the most profitable banks in the world and currently, their main assets are home loans. I'm wondering of the correlation between high quantity of bank home loans and property prices.
As well how the inflation is influenced by the bank credits? Can the bank borrow more money in example from the overseas and therefore increase the money supply without increasing the actual production and purchasing power and driving the inflation upwards? Can same be applied to the property prices?
Are the prices rising so high as a result of increasing amount of affordable loans or vice versa, the demand for property has driven the supply of cheap loans?
As I understand this is actually a problem of the central bank (not corporate banks) not increasing the interest rates, they are at record level low right now. Actually, because the wages are as well at record level low as a percentage of GDP and stagnate the central bank afraid to increase the rates because people won't be able to repay the mortgage.