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The only times when housing prices went backwards were during the First World War, the Great Depression, the Sixties Credit Squeeze, the Recession “We had to have”, the Global Financial Crisis and most recently, as a result of APRA restrictions on the amount of housing finance that investors could obtain from the banks.
Each of these events was a recessionary crisis that severely cut the amount of housing finance that was available to property buyers.
Unlike interest rate rises, which may impact only around ten percent of property owners, a lack of housing finance affects all potential first home buyers, upgraders, and investors, who together make up two-thirds of our housing market.
This is why house prices don’t fall when interest rates rise, but when there’s not enough housing finance available to potential buyers.
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