Income expectations, credit to households, and property prices: evidence from indonesia and brazil

We investigate the long-term cointegration relation between residential property prices,household credit expansion, and household income expectations and identify thechannels through which income expectation impacts residential property prices in theshort term for Indonesia and Brazil. We find that improved income expectations raisethe demand for credit, impacting residential property prices. Similar improvementsin income expectations also serve as important indicators for credit policy decisions,making more funding available to the household sector against the backdrop of risingproperty prices. In the short run, property prices respond significantly to one-timeshocks in income expectations in Indonesia, while credit to households respondspositively to property prices and private consumption expenditures in Brazil.