14% interest rates and the market boomed
June 8th, 2016 by Geoff Baldwin
14% interest rates and the market boomed…. In 1988, two years after I began my career in real estate, the WA market experienced a massive boom with prices increasing by up to 60% in an 8 month period. An
interesting fact was that the interest rate at the start of that boom was around 14 percent, a rate that would horrify property owners today. In fact, I remember making the statement that if interest rates were to drop to 10% I would fix mine forever.
At that time the average house price in Perth increased from $58,000 to over $100,000 and the headlines read that housing had become
unaffordable and that the market would surely suffer a long term downturn. Yes, it did suffer a couple of years of stagnation in the early nineties after interest rates soured to 20% but by 1995 the average price had increased to $125,000 and everyone wished they had purchased property in 1987.
Today that average is around $500,000 and again the popular call is that housing is unaffordable and that prices will drop but with interest rates as low as 4%, with prices having stagnated for several years and percentage rent returns pretty much as good as they have been for a decade the window of opportunity is closing and in a few years time
people will look back and wish they had purchased in 2016.