Interests rates may have been at 15%. However, dwelling price to...

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    Interests rates may have been at 15%. However, dwelling price to household income ratio in 1987 was only a fraction of what it is now. As interest rates decreased, people just borrowed more and bid up prices. Please refer to follow article.

    http://www.rba.gov.au/publications/bulletin/2012/dec/pdf/bu-1212-2.pdf

    The dwelling price to household income ratio was around 3-4 in 1987 and 6-8 in 2011. A lot of the rise being attributable to increased borrowing at lower rates. As wages have stagnated, the ratios could possibly be higher now in 2017.

    I am sure the government will try an work some magic, as a lot of government employees are property investors. However, interest rates 'can't' rise without a corresponding rise in household incomes. Otherwise, dwelling prices will suffer or maybe fall.
 
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