If interest rates remain the same for a longer period then houses must sell for a price where people can pay their mortgages.
Household income is a hard constraint. People can't pay more for interest payments than they earn.
House prices can still rise if:
• people can pay more on interest e.g. reduce their spending in other areas e.g. increase income using overtime. e.g. rent or AirBnB rooms.
• Or if they can lower mortgage interest costs by increasing deposits/equity e.g. sell down other investments, or borrow from friends/family e.g. downsize house.
• Or if more wealthy people move into the area
And it is a market - I am talking about how individuals drive the market price but obviously the price is set by successful sales and purchases. There is a lot of unmet demand by people who can't quite afford a deposit/mortgage.
Irrelevant whether someone is living in it or not.
And I don't think China is a relevant example when discussing mortgages in my country or the US.
If the market is driven by mortgages (presuming there are not other reasons why the market is disfunctional) then someone is paying the mortgage (or the opportunity cost of investing cash).
The market price mostly depends on how much people are capable (and willing) to spend on interest payments. Somewhat different dynamics in New Zealand because to an approximation our mortgages are all variable so we see house prices shift over a couple of years as interest rate changes (plus our interest rates are often higher than US rates). US 30 year mortgages at a fixed rate mean market prices drop more slowly, but I'm guessing can still rise quickly. Interest rates went up in NZ and two years later property prices are down 10% currently I think (plus sentiment still really matters too).
You can still fiddle with terms and a bunch of other free variables, but interest payments are one of the most significant variables.
If interest rates remain the same for a longer period then houses must sell for a price where people can pay their mortgages.
Household income is a hard constraint. People can't pay more for interest payments than they earn.
House prices can still rise if:
• people can pay more on interest e.g. reduce their spending in other areas e.g. increase income using overtime. e.g. rent or AirBnB rooms.
• Or if they can lower mortgage interest costs by increasing deposits/equity e.g. sell down other investments, or borrow from friends/family e.g. downsize house.
• Or if more wealthy people move into the area
And it is a market - I am talking about how individuals drive the market price but obviously the price is set by successful sales and purchases. There is a lot of unmet demand by people who can't quite afford a deposit/mortgage.