Why Today’s 25 Basis Point Interest Rate Rise Will Have Very Little Impact on Perth’s Property Market

Today’s interest rate rise will inevitably dominate headlines and trigger the usual questions about what it means for property prices.

In theory, higher interest rates should cool housing markets by reducing borrowing capacity and increasing mortgage repayments. And in many Australian cities, that relationship broadly holds.

But Perth is not currently a typical housing market. In fact, the structural dynamics shaping Perth today mean that this rate rise is likely to have very little impact on the direction of the market.

Interest Rates Matter — But Supply Matters More

Interest rates influence property markets primarily through borrowing capacity. When rates rise, buyers can typically borrow less, which can dampen demand and slow price growth. However, this mechanism only works effectively when housing supply is relatively balanced with demand.

Perth today is anything but balanced. The city is experiencing one of the tightest housing supply environments in decades, with strong population growth colliding with a shortage of available homes.

When supply is extremely limited, prices tend to be driven more by competition for scarce properties than by small shifts in borrowing costs. In other words, the key driver of Perth’s market right now is not interest rates, it’s lack of stock.

Population Growth Is Adding Pressure

Western Australia is currently experiencing strong population growth, particularly from interstate migration. Perth’s population grew by around 2.2% in the year to June, placing additional pressure on an already tight housing market.

Every additional household needs somewhere to live. When the supply of homes does not keep pace, demand accumulates and competition intensifies.

In this environment, even if borrowing capacity falls slightly, the underlying demand for housing remains extremely strong.

A 0.25% Rate Rise Barely Changes Affordability

The reality is that the rate rise itself is relatively small. For a typical mortgage of around $600,000, a 0.25% increase may add roughly $180 per month to repayments.

While no borrower enjoys higher repayments, this level of change rarely alters the fundamental decision to buy a home. Most buyers simply adjust expectations slightly, perhaps purchasing a marginally cheaper property or contributing a slightly larger deposit.

But it rarely causes demand to disappear.

Perth Remains One of the Most Affordable Capital Cities

Another reason Perth is resilient to rate movements is simple: relative affordability. Despite strong price growth over recent years, Perth still remains significantly cheaper than Sydney, Melbourne, or Brisbane.

This affordability means that buyers entering the market often have more financial headroom compared to eastern-state markets. As a result, moderate interest rate changes tend to have a much smaller psychological and financial impact.

Forecasts Still Point to Continued Growth

Most forecasts for the Perth market in 2026 still anticipate continued price growth. REIWA, for example, expects house prices to rise by more than 10% in 2026, with units potentially growing even faster.

Those projections already factor in the possibility of higher interest rates. Which again reinforces the point: the dominant forces driving Perth’s market today are supply shortages, population growth, and strong rental demand.

The Bigger Risk Is Still Housing Shortage

If anything, the larger issue for Perth is not rising interest rates, it is the ongoing shortage of housing.

New home construction has struggled to keep pace with demand due to labour shortages, higher building costs, and development delays. Until housing supply meaningfully increases, the imbalance between buyers and available homes will likely continue. When supply remains tight, prices tend to keep rising regardless of modest changes in interest rates.

The Bottom Line

Interest rates are always an important economic lever, and over time they do influence property markets. But context matters.

Right now, Perth’s housing market is being driven far more by structural supply shortages and population growth than by borrowing costs. Which means that today’s interest rate rise, while significant for borrowers’ monthly budgets, is unlikely to materially change the trajectory of Perth property prices.

For the foreseeable future, the real story of Perth’s market is not interest rates. It is housing supply, or the lack of it.

About the Author

Andrew Huggins is Principal of Ray White Urban Springs and has been the top real estate agent in the City of Belmont for more than 20 years. He writes about Perth property trends, Western Australian real estate insights, and the long-term economic forces shaping Australia’s housing markets.