The prices of houses are mostly determined by the supply and demand mechanism in the free market. When the demand for houses rises faster than the supply of houses, then the prices for the housing goes up. Similarly when the supply of the houses rises faster than the demand then the prices of housing tends to go down. In most cases the prices tend to increase with the increasing trend for rise in demand. However in a more realistic market supply and demand is only one of the factors affecting the price of housing and property.
The interest rates also affect the price of housing as they form the base rate in an economy. The financial institutions lend money through mortgage in the housing sector and with increasing interest rates the value of the mortgage payment also increases. This increases the overall price of a property or a house. However in a region where there are fixed interest rates, the effect on the housing prices is minimal. Aside from this it is also possible for previous interest rates to have effects on the next years housing prices.
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