So do property prices fall when interest rates rise?
From the table and graphs in this article, between 2002 and 2008, home loan mortgage rates rose from 5.2% to 8.62%
The median house price during this period more than doubled in all capital cities apart from Melbourne, Sydney and Canberra but still showed growth of 53.84% in Melbourne, 31.38% growth in Sydney and 84% growth in Canberra
Between August 2009 and November 2010 interest rates rose from 4.94% to 7.01%. During the same period the Melbourne median house price rose from $488,944 to $520,000
In 1970, interest rates were 6.5% and rose to 17% in 1990.
During this period of high interest rates house prices in Sydney rose from $18,000 in1970 to $147,000 in 1990. An increase of 716.66%.
In Melbourne the median house price rose from $12,800 in 1970 to $131,000 in 1990. A rise of 923.43% during this period
So in summary, I do not believe house prices will fall under the current economic settings.
History illustrates that property prices rarely fall with low unemployment , shortages in house stock inventory or during periods of rising inflation.
Almost every economist and media commentator have predicted a property price fall with some saying this correction will be as much as 15%. I do not concur with this view.
I suppose we shall have to wait and see who is correct!
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