It’s time to pull out the crystal ball and talk property prices. With house prices falling in Sydney (4.5% in the past year), the question is, will the same thing happen here? For this post I thought I’d develop a bottom-up ‘economic’ model.
The fallacy that property prices double every 10 years
It’s convenient and lazy to show that for the past thirty years house prices have doubled every ten years, and even worse to extrapolate it out into the future. For those of you that like a few numbers, strap in as you’re about to exercise your brain, but I promise it’s worthwhile.
I get asked daily what’s happening with interest rates. To answer this question, it’s useful to first define what may affect interest rates. The major influence on interest rates is inflation. As inflation rises, interest rates rise to curb inflation (spending). As inflation falls, interest rates fall to spur spending and economic growth.