Rising interest rates can have various effects on the real estate market:
- Higher borrowing costs: When interest rates rise, mortgage rates and borrowing costs for buying a property become more expensive. This increases the monthly installments for property loans, which can deter potential buyers. This can lead to a drop in demand for real estate.
- Falling real estate prices: If the cost of buying a property rises, this can lead to a fall in property prices. Some buyers may struggle to pay the higher prices, which could lead to less competition and ultimately falling prices.
- Slower market growth: Rising interest rates can slow down the growth of the real estate market as fewer buyers can afford to buy a property. This can lead to less activity in the market, which can affect sales and investment in real estate.
- Shift to renting: If it becomes more difficult to buy a property, more people may choose to rent. Increased demand for rental apartments can lead to rising rental prices as supply becomes scarcer.
Of course, it is important to note that the real estate market is influenced by many other factors, such as the state of the economy, supply and demand, the political situation and local market conditions. The impact of rising interest rates on the real estate market can therefore vary from region to region.
