Low interest rates directly drive up housing prices of equivalent houses. If you drive down monthly mortgage payments while keeping rents constant, buying residential property and renting it out becomes more economically attractive, which then drives up the house price at which buying an investment property is sufficiently profitable.
In other words, the fixed factor is the spot rent market - how much you can get renting out a house in a certain location. When you lower interest rates, the monthly payment remains relatively constant, which drives up the principle to compensate.
