Based on historical data, interest rate hikes will not quell or deflate the rising real estate market. In fact, the evidence is quite the contrary says Terry Ryder, a journalist for The Australian, author and researcher specialising in residential property and founder of hotspotting.com.au.
“There is no evidence that lifting interest rates correlates with a fall in dwelling prices,” says Mr. Ryder. With the official interest rate at 6.25% in 2007, (compared with 4.25% today) and rising to 7.25% six months later, the dwelling prices kept rising.
Indeed price growth continued to accelerate throughout 2007 and well into 2008. “The more the RBA lifted rates, the faster the rate of price growth. It was only the onset of the GFC that finally slowed the market.”
With the GFC well and truly behind us, it is clear that the current batch of interest rate hikes is bearing this out with prices continuing to grow unabated.
Based on his research Mr. Ryder says, “My three decades of researching real estate tell me price trends correlate more with the level of public confidence than the level of interest rates. If anything, rising interest rates have a positive impact on confidence, because they are a sign of an improving economy.”
Further evidence from real estate research company Residex shows that rising interest rates data on periods in the 70s and 80s were followed by accelerating or steady house price inflation.