Why Today’s RBA Rate Rise Is Unlikely to Derail Perth’s Property Market

Today’s 25-basis-point interest rate increase by the Reserve Bank of Australia will undoubtedly attract headlines and prompt questions about its impact on property markets. In most Australian cities, higher rates tend to cool demand by reducing borrowing capacity.

However, Perth’s current market dynamics are materially different, and the effect of this rate rise is likely to be far more muted than many expect.

Interest Rates Matter — But Supply Matters More

In a balanced market, interest rate rises can slow price growth by reducing buyer capacity. In an undersupplied market, the effect is often very different.

Perth is currently experiencing one of the tightest supply environments in its history, with total listings falling to below 2,000 properties in late 2025. This extreme scarcity — described as Perth Property Gridlock — fundamentally alters how rate rises transmit through the market.

When buyers are competing for a very small pool of properties, modest changes in borrowing capacity do little to ease competition. Instead, buyers adjust expectations, compromise on property type or location, or deploy larger deposits — rather than stepping away altogether.

Why This Rate Rise Is Unlikely to Release SupplyRay White Now: Chief Economist – Nerida Conisbee

One of the key mechanisms through which rate rises cool markets is by encouraging sellers to list — either due to affordability pressure or fear of falling prices. That mechanism appears weak in Perth.

Many potential sellers remain on the sidelines not because of price uncertainty, but because they cannot find suitable replacement properties. A 25-basis-point increase does not resolve that issue. In fact, higher rates may further discourage discretionary selling, reinforcing the gridlock rather than easing it.

Buyer Demand Remains Structurally Supported

Perth’s buyer pool is being supported by long-term forces that are largely insensitive to small rate movements:

• Ongoing interstate and international migration
• Defence-related demand linked to the AUKUS submarine program, which will require housing for more than 2,000 personnel and support staff
• Employment growth associated with the $5 billion Perth Airport expansion
• Mining and resources companies requiring FIFO staff to be based in WA

Many buyers entering the Perth market are doing so for employment, lifestyle or relocation reasons — not purely financial leverage. These buyers are less likely to withdraw in response to modest rate increases.

A Smaller Sensitivity Than in Other Cities

Perth also enters this rate-rise environment from a different starting point than the eastern states.

• Property values, while rising, remain relatively affordable by national standards
• Household leverage is generally lower than in Sydney and Melbourne
• Rental conditions remain extremely tight, reinforcing the buy-versus-rent decision

As a result, the market’s sensitivity to incremental rate changes is lower.

What We’re Likely to See Instead

Rather than a sharp slowdown, today’s rate rise is more likely to produce a change in behaviour at the margin, including:

• Greater focus on affordability, benefiting units and townhouses
• Continued strength in well-located, well-priced stock
• Little relief on supply, meaning competition remains elevated

In this context, units may continue to outperform houses in percentage terms, as buyers adapt to higher borrowing costs without exiting the market entirely.

Local Impacts: Inner-East Perth

In suburbs such as Belmont, Rivervale, Cloverdale, Kewdale, Ascot and Redcliffe, buyer depth remains strong despite rate changes. These areas benefit from proximity to the CBD, Perth Airport and major employment nodes — factors that tend to outweigh modest shifts in interest rates.

As the highest-selling agent in Belmont and Rivervale for many years, I am not seeing evidence that today’s rate rise has materially altered buyer intent. Instead, buyers are becoming more selective, more prepared and more decisive when quality opportunities arise.

Does This Change the Outlook for 2026?

At this stage, no material change to the broader outlook is evident.

If supply remains constrained and population and employment growth continue as expected, Perth is still positioned for continued firm conditions through 2026, even in a higher-rate environment.

While interest rates can influence how buyers buy, they do not change the fundamental imbalance between supply and demand currently driving the Perth market.

The Bigger Picture

Interest rates are one variable. In Perth right now, supply is the dominant one. Until there is a meaningful increase in listings or a sustained surge in new housing delivery, modest rate rises are more likely to slow the pace of activity than reverse price pressure.

For buyers, this reinforces the importance of preparation and realism.
For sellers, it suggests conditions remain supportive — particularly for well-located, well-presented properties.

By Andrew Huggins
Principal, Ray White Urban Springs
Highest-selling agent in the City of Belmont and Rivervale for many consecutive years