A potent channel

Recent evidence of a sharp slowdown in house construction in major markets poses downside risks to global growth

An important and potent channel of monetary policy transmission is the housing market. Weakness in housing demand triggered by higher interest rates is an important contributor to the intended slowdown in overall economic activity. 

This is particularly so in developed economies, where real estate is formalised, and mortgages are 30 per cent to 60 per cent of banking credit. There are several intuitive reasons for this. Not only is housing an important source of economic demand, accounting for 10 per cent to 24 per cent of gross domestic product (GDP), but it is also an important asset for most households (the