Monetary Policy and Housing Market Behaviour in Sri Lanka

Abstract

Housing is a crucial factor in determining the living standards of citizens in a country and changes in financial support rates have a significant impact on housing demand. As a developing country, Sri Lanka experiences a housing backlog and existing studies have focused on the effect of monetary policy on housing prices, but inadequate research has examined housing market behaviour in terms of demand. Therefore, this study provides empirical evidence on housing market behaviour in Sri Lanka, specifically regarding changes in monetary policy. Findings demonstrate a negative relationship between monetary policy changes and housing demand. Consequently, it is strongly recommended that government policymakers consider these study outcomes to foster the healthy growth of the housing market sector.