Abstract
AbstractMiles and Monro (2020) show a large proportion of the long‐run increase in real house prices in the United Kingdom is due to persistent, but unanticipated, declines in the risk‐free real interest rate. Applying their user cost method to Australia indicates longer‐run growth in real house prices is better accounted for by changes in the real mortgage rate than in the risk‐free rate, especially during the period 2004–2019. Declines in real mortgage rates during the COVID‐19 pandemic are consistent with long‐run growth in house prices in the range of 10–50 per cent.
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