Interest rates also have an interesting influence on property investment, both from the buyer’s and seller’s perspectives.
High interest rates will increase the cost of capital and reduce the return on investment in property, making property investment less attractive.
Conversely, low interest rates will lower the cost of capital and increase the return on investment in property, making property investment more attractive.
However, the relationship between interest rates and property investment is not always straightforward and simple.
There are other factors that also affect property investment, such as cash flows, rent growth, price appreciation, risk, diversification, and others.
Therefore, not all increases or decreases in interest rates will have the same impact on property investment in various regions and market segments.
For example, in 2023, property investment in the US still showed positive performance, despite a sharp increase in mortgage rates.
This is due to other factors supporting property investment, such as strong economic growth, rising incomes, declining unemployment, limited housing supply, and fiscal stimulus from the government.
Additionally, property investment also provides benefits such as stable cash flows, high rent growth, significant price appreciation, protection against inflation, portfolio diversification, and financial leverage.
From the above discussion, it can be concluded that interest rates have a significant impact on the property market, both in terms of prices, transactions, and investment.
However, the relationship between interest rates and the property market is not always straightforward and simple but rather complex and complicated, as it is influenced by various other factors that also fluctuate.
Therefore, property buyers, sellers, and investors should pay attention not only to interest rates but also to other relevant factors and conduct in-depth and comprehensive analysis before making decisions related to the property market.
That’s all from Kisanak.
References
- How Rising Interest Rates And Inflation Impact Real Estate Investments: [The impact of today’s higher interest rates on the housing market]
- Al-Hajjar, A., et al. (2017). The impact of stock market and macroeconomic variables on real estate prices dynamics: evidence from Saudi Arabia. Semantic Scholar.
- Özdemir, M., & Aksoy, B. (2019). Dynamics in Turkish Housing Market. Semantic Scholar.
- El-Kharouf, N., et al. (2016). A quantile regression approach and nonlinear analysis with Archimedean copulas to explain the movements of residential real estate prices. Semantic Scholar.
- Li, Y., & Liu, X. (2011). The Impact of Interest Rates on House Price Movements From 1980 to 2008 Across 16 Countries. Semantic Scholar.
- Chen, C., et al. (2022). Experimental Research on the Impact of Interest Rate on Real Estate Market Transactions. Semantic Scholar.