Interest rates, especially the rates on interbank exchanges and Treasury bills, have as profound an effect on the value of income-producing real estate as on any investment vehicle. Because the influence of interest rates on an individual’s ability to purchase residential properties (by increasing or decreasing the cost of mortgage capital) is so profound, many people incorrectly assume that the only deciding factor in real estate valuation is the mortgage rate. However, mortgage rates are only one interest-related factor influencing property values. Because interest rates also affect capital flows, the supply and demand for capital and investors’ required rates of return on investment, interest rates will drive property prices in a variety of ways.
Read more: How Interest Rates Affect Property Values | Investopedia http://www.investopedia.com/articles/mortgages-real-estate/08/interest-rates-affect-property-values.asp#ixzz47zJlU0E3 By Robert Stammers
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