OPINION
Over the past 30 years, housing price growth has always slowed when interest rates have risen, but higher interest rates have not always been associated with outright falls in house prices.
The difficulty in drawing conclusions about housing prices from past episodes of higher interest rates has been (a) the ongoing structural decline in interest rates and (b) easier access to credit, both providing a significant cushion to house prices when faced with headwinds. The absence of a significant economic downturn post-GFC has also clearly helped.
Over the inflation targeting period since the early 1990s, the fall in interest rates has played a key role in fundamentally supporting higher housing prices.
Historically low interest rates since mid-2019 have more recently been the key catalyst for a higher "capacity to pay" for housing. New mortgage repayment affordability is now however starting to flash red.