last chance motel, page-25

Price can fall with rising demand in a sector where most of purchase price is borrowed. In a cash market rising demand would push up price. In the property market as most of purchase price is financed, interest rates and the propensity to take on debt significantly affect the price. People may wish to have their own residence, they may live with family members, share a home, live in a garage. But true demand is those who can afford a residence at present prices. The concern is the level of "true demand" will fall with rising interest rates. The other factor is the longer prices stagnate, the greater the fall in the propensity to borrow as the anticipation of windfall gains from rapidly rising property prices will subside.