I’m a layman, not an expert by any means but wouldn’t interest rate increasing mean spending, including buying property, decrease? Would that not mean that house prices would fall to intice more spending?
I understand currently interest rates are normal zing or falling but hasn’t this been the case for many years now since COVID lockdown?
In: Economics
Inflation is higher than interest rates by a significant margin. It means, that holding cash makes you loose money in real terms and most of “financial instruments” like bonds or shares can’t give you return to cover the inflation. At least not with significant risk involved.
So people are looking for places to “park” their wealth and maybe get a decent return with low risk. Real estate is at the moment the best place to do that for vast majority of people. Add to this low supply of houses and things are getting clearer.
Eli5:
*High interest rates are much lower than inflation, which makes buying a house an attractive investment.
*Demand for new homes is bigger than supply of them.
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