Optimistic expectations about housing markets at a time of: (a) increasing deregulation and liberalisation of the banking and financial sectors, (b) fast financial innovation, and (c) progressive globalisation of financial markets, led to rapid appreciation of house prices, which was supported by excessive indebtedness of households in some countries.
The Bank’s current policy measures have been helping to underpin demand, by encouraging money market rates to decline and by providing ample liquidity to financial institutions. Fiscal measures have also been taken to stimulate demand for consumer durables. Further restructuring efforts in the private sector are necessary to achieve sustained growth in demand.