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Beyond Interest Rates: Factors Affecting Housing Prices

housing prices

As we have seen, rate rises can affect the property market, but there are other factors that appear to hold longer-term sway over national house prices. 

In a bid to bust inflation, the Reserve Bank of Australia (RBA) has been on a rate rise run that has seen the official cash rate go from a record-low of 0.10% to 3.60% in just 10 months.  

Along the way we have seen property prices across Australia decline.  

As rates rose, Australia saw the largest and swiftest property price drop on record, with a 9.1% fall from April 2022 to February 2023. But a recent study by Domain, which explained 30 years of data, suggests that population and migration growth have greater and more long-lasting effects on property prices. The study shows that a 1% mortgage rate increase may result in Australian house prices falling by 1.34% on average. But in comparison, national house prices could jump by 8.18% with a population increase of only 1%.  

Effects of Rising Mortgage Rates and Population Growth

Mortgage Rate Rise Effects 

When interest rates rise, your borrowing power can dip, and the rise in cost of living can hit the hip pocket. So, under these conditions, fewer people may be willing to buy property. 

With less demand, vendors may need to lower prices to sell homes, and if you are ready to buy you may be able to negotiate a great price.  

But the RBA can’t keep raising the cash rate forever!  

In fact, economists at each of the big 4 banks have forecast that the RBA will announce a peak cash rate of 4.10%.  

CoreLogic stated in their recent three-year post-pandemic market report that once we get a rate hike reprieve, property sale and price volatility may lessen.  

Population and Migration Effects 

When mortgage rate rises do affect property prices other factors appear to have more long-term effects.  

Domain’s findings outlined that property prices are reactive to rate rises within the same quarter, whereas movement in population and migration numbers is cumulative and the effects are longer lasting.  

As migration numbers contribute to rebound following the Covid 19 lockdowns and lockouts, it is likely that we will see an increase in property demands, which could cause prices to rise.  

For example, Domain says Melbourne has “made a quick population recovery” since the Covid 19 lockdowns and is set to be Australia’s most populated city by 2031-2032. Melbourne had an 8.1% property price drop in 2022, while Sydney experienced a bigger reduction of 12.1%. Domain’s study suggests that Melbourne’s population boom, and the resulting increase in housing demand are behind the more moderate price drop. And so, whilst it is worth considering mortgage rates when surveying the property market, other factors like population and migration, which feed directly into supply and demand, are certainly worth considering too.  

If you would like to dig into the modelling further, the Australian Government’s Centre for Population website has a great interactive tool that you can use to check out migration forecasts for each state and territory.  

Frequently Asked Questions

What are the key factors affecting housing prices in Australia?

The key factors affecting housing prices in Australia are interest rates, population growth, and migration patterns.

How do interest rate hikes impact the property market?

Interest rate hikes can reduce borrowing power and increase the cost of living, making fewer people willing to buy property. This can lead to a drop in property prices.

What is the long-term impact of population growth on housing prices?

Population growth has a more long-lasting effect on property prices compared to interest rates. A 1% increase in population could result in an 8.18% increase in national house prices.

How do migration patterns affect the property market?

Migration contributes to population growth, which in turn increases demand for property and potentially raises property prices.

What is the role of the Reserve Bank of Australia (RBA) in the property market?

The RBA sets the official cash rate, which influences interest rates and, consequently, the property market. However, they can’t keep raising the cash rate indefinitely.

Where can I find more information on migration forecasts?

The Australian Government’s Centre for Population website offers an interactive tool for checking out migration forecasts for each state and territory.

Get in Touch with Us  

Keeping an eye on the property prices is a great idea if you have got home ownership in your sights. And while you are busy researching the market, we can get cracking on helping you find the right loan for you. We can also help you get financially savvy with tips to boost your borrowing power – that way you will be ready to pounce when the time is right. 

Phone: 1300 855 022


Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business. 

About the Author:   

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.   

Connect with Louisa on Linkedin.   

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial. 



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