Bit off topic champ2003 and it would be a quite a lengthy post to try and explain my reasoning (and back it up with all the facts) properly but your first port of call is the "recent" empirical evidence. Take a look at this chart of international house price from the Bank of International Settlement (BIS) report from 2014.
http://www.bis.org/publ/qtrpdf/r_qt1409h.htm
Now look at the series for the two major economies on those charts being Japan and the US. I've also charted below interest rates for those two countries.
Interest rates made their last peak in Japan in 1991 before heading to the zero bound. Take a look at the property price values for Japan. They started falling once this peak was made and keep following interest rates lower.
In the case of the US interest rates there made their last peak in 2006 before heading to the zero bound. Property prices started falling in the same year. It should be understood that the US stock market crash didn't cause the property prices to collapse it was the other way around. Property prices started falling two years before the market crashed in 2008 and became the catalyst for the crash because the loans made by the mortgagees where collateralized and turned into extremely flawed forms of securities that were peddled from hill to harbour.
I'll stop there and leave your sister with the above information to think about as there is a lot more I could say on this subject to explain why and we could go through and look at all the other examples to see if this relationship holds but as you can see it is rising interest rates that cause the peak in property prices but it's the last peak before going to the zero bound that sets a property markets fate in stone (well at least in the case of the Japan and the US) . I would say we have seen the last peak in interest rates in Australia wouldn't you?
Eshmun
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