Dr. Tom McDonnell:

Rather than saying “cancelling” it, I would say it would have a countervailing effect. When you put all of these things into a model, one thing will increase prices and another will reduce them. Therefore, sometimes you see prices might have gone up or down. That does not mean that a particular policy such as interest rate increases had no effect; it just means it was not sufficient to cancel out the pressures coming in the opposite direction. Obviously, if you increase real disposable income for higher income households that do not have to spend all of their income on necessities, that gives them more resources to chase house prices and things such as that or go on foreign trips or wherever it might be.

Interest rates will have a dampening effect. However, fundamentally, there is a supply and demand issue in the housing market. The demographics suggest that demand for housing is increasing, depending on the model used, by between 30,000 and 40,000 units every year.