Interest rates have a greater effect on property prices concludes RBA
“Hello and welcome back to daily buying tips, I’m Dean Berman from Berman Buys.
Today we’re going to talk about a recent finding by the RBA and house prices.
I’ve often believed many factors affect price movements.
Supply & Demand.
Construction costs etc…
The RBA recently concluded that interest rates have a large and significant direct effect on construction activity.
This is because the cost of finance becomes cheaper.
If something usually becomes cheaper, more people will usually use it.
The RBA continues to explain that low interest rates.
Explains much of the rapid price growth in housing prices and construction over the past few years.
Once again as the cost of money becomes cheaper, more people will use it.
The report found a 1% cut in interest rates boosted house prices by 8% over the past 2 years.
The report also claims that high immigration levels contributed to growth in prices.
This is more people becoming residents and demanding more property.
More demand for property, will put upward pressure on prices.
Which at the end of the day, does come back to supply and demand.
However, the key finding is interest rates have a greater effect on property prices than initially thought.”