A Study of the Relationship Between Expansionary Monetary Policy and Real Estate Prices: An Analysis of Capital Flows in the Gulf Countries for the Period 2010-2022

Ameen Fahad Jayed

doi:10.36690/2674-5208-2026-1-27-43

Authors

Ameen Fahad Jayed Ministry of Education https://orcid.org/0000-0002-9167-1453

DOI:

https://doi.org/10.36690/2674-5208-2026-1-27-43

Keywords:

monetary policy, property prices, investment, capital flow, Gulf Cooperation Council, expansionary monetary policy, foreign direct investment, real estate market, interest rates, housing prices, credit expansion, GCC countries

Abstract

The relationship between expansionary monetary policy and real estate market performance has become increasingly important in the Gulf Cooperation Council countries, especially in the context of intensified foreign capital movements and post-oil-shock structural shifts. The issue concerns not only changes in real estate prices, but also the broader economic conditions in which these changes occur. The study aims to assess how expansionary monetary policy affects real estate prices in GCC countries during 2010-2022, with particular emphasis on the role of foreign capital flows in shaping market dynamics. The research applies a vector error correction model based on quarterly data from six GCC countries. This methodological framework makes it possible to trace the transmission of monetary shocks and distinguish between immediate and subsequent effects on the real estate market. The findings reveal a significant inverse relationship between long-term interest rates and housing prices. In particular, a 10% decline in the interest rate was associated with an approximately 8.74% increase in housing costs, confirming a strong monetary transmission effect. Foreign direct investment, although smaller in scale than domestic credit, emerged as an important factor explaining real estate trends and market dynamics. Moreover, interest rate spreads, credit expansion, and foreign capital inflows that intensified after the 2015 oil price decline point to structural transformations in GCC economies. At the same time, the effects were less pronounced in the UAE and Saudi Arabia, where regulatory regimes and monetary policy frameworks differ more substantially. The study concludes that real estate price dynamics in the GCC require careful monitoring, while policy responses should support economic activity and ensure stable capital flows. Further studies may examine country-specific regulatory mechanisms, the long-term sustainability of capital-driven real estate growth, and the comparative resilience of GCC housing markets under changing external shocks.

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Author Biography

Ameen Fahad Jayed, Ministry of Education

Muthanna Education Directorate, Ministry of Education

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