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Michael Yardney Podcast

Insightful, educational and always interesting

Listen and learn from Michael Yardney, Australia’s most trusted property commentator and a group of experts as they discuss Property Investment, Success, Money and Finance to help you multiply your wealth.
While Michael is best known as a property expert, he is also Australia’s leading authority in the psychology of success and wealth creation. You’ll enjoy the way he challenges traditional finance advice with innovative ideas on real estate investing, personal finance and wealth creation. 
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Apr 18, 2022

Last year was an extraordinary year for many homeowners and investors when their property values went up more than they owned in everyday regular income.

Clearly, the market’s changing.

When the property market’s booming, everyone’s an investment genius. But when the property market’s different, I think it’s really important to listen to those who’ve got a perspective – who’ve lived and invested through many different cycles.

That’s why I’m talking to property researcher John Lindeman today. John believes that property values are going to keep rising. I know that’s contrary to what some of the big bank economists are suggesting, so it will be interesting to hear his thoughts.

In his recent report, John’s gone back to 1901 to look at the statistics. He isn’t just somebody thinking about property and telling you what’s going to happen – he’s done careful research to see what happens to property values when interest rates rise.

At the end of today’s show, I hope you’ll have more clarity about what’s ahead for today’s property markets.

Why property prices will keep rising

Last year around 98% of locations around Australia recorded rising property values with many properties rising in value by more than 20%.

Interestingly the Australian Bureau of Statistics said that the value of Australia’s property portfolio skyrocketed to $9.9 trillion in 2021, driven by a record-shattering 23.7 percent annual rise in property prices.

The collective wealth of homeowners increased by $2 trillion in just one year alone – a sum 30 percent larger than the annual output of the entire Australian economy.

The growth in property wealth in the past two years is higher than all the gains over the decade before COVID-19 (2010-2019) combined.

Some bank economists are predicting that house prices will fall this year or in 2023 as interest rates increase, but property market analyst John Lindeman explains why property prices will continue to rise.

Economists are concerned that the Reserve Bank will soon raise interest rates to slow down inflation because inflation is very hard to reign in once it takes hold. They believe that higher interest rates will make housing less affordable, and that lower buyer demand will then push prices down.

It seems to make sense that higher borrowing costs will reduce buyer demand and therefore prices will fall. But it’s hard to test this theory because interest rates have gradually declined since 1990 when the standard variable home loan rate was all the way up to 13.5%.

For over 30 years property prices have grown and interest rates have fallen.

There certainly is a strong correlation between falling interest rates and rising property prices, but does this mean that the reverse is also true? How can we be sure that if interest rates rise, property prices will fall?  

  • In the last 30 years, property prices did not fall when interest rates rose
  • One-third of our housing is fully owned, with mortgages having been paid off and no remaining debt.
    • The owners are mostly older couples living in empty nests and when they sell, it will be to downsize. So, interest rate rises are of no concern to them.
  • Another third of our housing stock is owned by investors who can claim the cost of housing finance interest against all their other income.
    • This means that interest rate rises reduce the amount of income tax they pay.
    • They can also raise asking rents on their properties to recoup the cost of any interest rate rises.
  • Only one-third of our residential properties have mortgages that are being paid off by owner-occupiers.
    • Most of them purchased their homes many years ago when rates were much higher than they are now. Their financial situations have improved since then and they have probably paid down some of their debt, so a rise in interest rates is manageable
  • Only first home buyers are badly impacted when interest rates rise

Some highly leveraged recent first-time buyers in new outer suburban first home buyer areas may experience mortgage stress when interest rates go up. If enough of them are forced to sell, and the number of potential first home buyers also falls, there is a risk that property values in first home buyer locations may fall.

But first home buyers only comprise around one-tenth of all homeowners, and despite the personal and social impact of such events when they have occurred in the past, local markets have always bounced back into growth within a few months.

The only times when housing prices went backward 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, because of APRA restrictions on the amount of housing finance that investors could obtain from the banks.

The aim of interest rate rises is to curb inflation, not hit housing prices

Because rising interest rates only impact a small percentage of homeowners, we should look at the reason that they are increased, which is to slow down the rate of inflation. Is there a link between rising inflation and housing prices?   

Housing prices have always moved in sync with the rate of inflation. Housing prices have historically tended to move more vigorously than inflation rates but always in the same direction.

In periods of rapidly rising inflation such as the post-war years and the seventies hyperinflation years, housing prices experienced their most dramatic price growth in our history.

In summary, interest rate rises only impact a small percentage of property owners, while property prices on the whole rise whenever the rate of inflation increases. If inflation goes up this year or next, so will property prices.

Links and Resources:

Michael Yardney

Get the team at Metropole to help build your personal Strategic Property Plan Click here and have a chat with us

John Lindeman of Lindeman Reports

Read John’s article referred to in the Podcast here

Get a bundle of free eBooks and reports at

Shownotes plus more here: Don’t worry. Here’s why property prices will keep rising, with John Lindeman

Some of our favorite quotes from the show:

“It’s going to be a more fragmented market this year, I think, moving forward.” – Michael Yardney

“I think the Reserve Bank’s also learned lessons from the past about raising interest rates.” – Michael Yardney

“So much of the drama that people go through in their careers and their personal life and their investing is avoidable if they listen to the signs the first time around.” – Michael Yardney


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