So today  I was looking at a graph showing how house prices moved since the rba began tightening cycles in the past so please note as always everything discussed here is done so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile so you should seek professional advice before making any investment decisions so what i want to talk about today was a graph i was looking at which actually showed how house prices moved against the rba as they completed their tightening cycles and so tightening cycle you know that's defined by where they're putting the rates up so basically uh tightening the monetary policy effectively um you know sort of making it harder for the funds to circulate uh and basically you know the rates being higher effect all that so um we would consider it a tightening cycle when the rate is increasing in an easing cycle when the rate is decreasing and you know when the government may be doing other stimulus as well so this graph that i was looking at today um it's actually got data from the rba and core logic and basically to first describe the graph um there are four time periods that are shown here so first is august 94 second is november 99 third is may o2 and the fourth is november um 2009. uh basically the data shows that the duration and change in house prices um you know from when the cash rate first increased to the period where it was 12 months after the last cash rate increase and that was the duration of the tightening cycle as sort of defined by this graph so for example in the august 94 cycle it lasted approximately 18 months in total duration and while the graph isn't exact it looks like property prices declined about three percent to the bottom and basically the total duration uh looks like about 18 months from the end to end um in terms of the whole tightening cycle so basically a year and a half was the only amount of time the titan four then went back to easing next was the cycle in 99 that might lasted for approximately 20 months so just under two years but prices actually rose during that period by about 15 so um you know the interesting there but that's probably on the back of a strong economy um would need to look back at the data at that time but certainly you know prices appreciating strongly like that in just the 20 months of tightening is um is is very interesting and then if we look at the may 2002 cycle that was by far the longest and so the tightening actually went for nearly 80 months so that's 8-0 and during that time property prices actually rose approximately 50 percent so it was actually a big gain um in terms of prices during that time uh despite the tightening um and i think that this you know historically is consistent with what i always sort of learned growing up um and that was that you know interest rates went up in a strong economy environment and you know a strong economy is often uh i guess the backbone you could say of appreciating housing prices so you know while that might sound crazy the prices actually rose 50 during a tightening cycle um you know it actually does make sense that you know that is uh potentially being accompanied by economic expansion and then lastly the tightening cycle of november 2009 lasted for about 24 months uh prices initially rose then ended up down about one percent so um you can see here that total cycle was only about two years um of tightening there and so you can see actually um overall this all sounds quite optimistic in terms of both the length of the tightening cycles and also by how much property actually moved in value the thing is i guess historically i believe the tightening cycles were more accurately in response to a heated economy and the higher interest rates were designed to sort of slow down demand and you know subsequent price growth with it however you know the current situation i believe is different because i believe a lot of the cost inflation is actually supply side constraints as opposed to excess demand um and so you know through the supply chains or the shipping issues from kovid you know this has been you know exacerbated with a lot of stuff that's going on in the world at the moment and then obviously the rush ukraine situation has um put fuel on the fire in terms of supply chains so i am more of the uh belief that you know this is a supply side that is really driving a lot of the inflation but you know you certainly can make it the argument that there was always going to be some inflation after the amount of you know money printing that happened over the last couple of years um and so basically you know you could argue that we have had some excess demand uh especially in housing in the last year um you know but you know it wasn't the only thing increasing in cost i mean even if you look at used cars people have been buying those that have been appreciating and you know historically used cars were one of the fastest depreciating assets so you know if that's not an example of some of the inflation that we're actually seeing then i'm not sure what is um so you know to be blunt i guess um in a lot of locations i'm not a believer that rates will go up and property prices will go up alongside them this cycle uh like we have seen in a few of the cycles in the past um but i would highlight the very interesting part here is how short the tightening cycles are and when the easing cycles start again that's when you could potentially see the door open to another bull market and a real increase in prices at least in my opinion and so you know aside from the 2002 cycle which was the outlier there you know lasting the 80 months generally these tightening cycles lasted for less than two years so it was typically a relatively short period of tightening before you know the central banks would turn around and go back to potentially easing here so whether that plays out in the future similarly or not um you know it remains to be seen uh unfortunately i don't have a crystal ball um i am of the belief that they will soon put up rates and they'll soon realize that putting up rates is not really uh fixing the fixing the problem and it's actually going to cause more issues than it's um solving and i'm of the belief then that they will turn around and go back to an easing cycle the challenge is that you know we don't know whether that's going to be two years whether it's going to be the 80 months whether it's 800 months you know we just we just don't know these things so um you know if we go back and forth there's generally a cycle of regulation deregulation tightening easing with um you know regulation and and so forth and even in the time that i've been running this show now uh going back say six years um you know we've seen uh tightening and easing in that time so um you know basically you know the conversation changes over time um it was unfathomable to print money you know in in substantial quantity pre-covered and then covet happened and now that's happened now we're looking at a big rate rise cycle um but you never know what's what's right around the corner so um it's important we think long term um you know i don't know what's going to happen with rates that could skyrocket before anything happens and you know it's very hard to know what's going to happen property price wise because if we look you know history a lot of the times prices have actually gone up with rates going up um even though i don't believe that will necessarily be the case in a lot of locations this time around that being said you know there are many markets within a market and so one you know there is obviously always more to the story um and i should you know also mention that you know if we do go uh back to an easing of monetary policy you know that could be really letting inflation rip and if we do let inflation rip then you know that could be uh you know potentially um compounding the cost of everything going forward so there could be a lot more volatility cost of living could increase uh and certainly we are heading into interesting times but today i just wanted to discuss those historical events so that we can look at potentially what may happen in the future and analyze the data that we do have from the past so please note as always everything discussed here is does so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile so you should seek professional advice before making any investment decisions i really appreciate you tuning in as always thank you