Interest rates not only affect house prices but also affect the volume and frequency of property transactions.
Generally, high interest rates will decrease the number and frequency of property transactions, as they make borrowing costs more expensive and reduce buyer interest.
Conversely, low interest rates will increase the number and frequency of property transactions, as they make borrowing costs cheaper and increase buyer interest.
However, the relationship between interest rates and property transactions is not always straightforward and simple.
There are other factors that also affect property transactions, such as market expectations, business cycles, social conditions, and others.
Therefore, not all increases or decreases in interest rates will have the same impact on property transactions in various regions and market segments.
For example, in 2023, existing home sales in the US reached their lowest level since 1995, as high mortgage rates caused many buyers to postpone their plans to buy a home.
However, this did not apply to new home sales, which instead increased in 2023, because the demand for houses remained strong and the supply of existing homes was limited.
Additionally, there is also a phenomenon called “lock-in effect,” where homeowners with low-interest mortgages are reluctant to sell their homes to buy new ones with higher mortgages.
This reduces the mobility and liquidity of the property market.