--- title: "40 Years of Data Prove It: Property Prices Don't Care About Interest Rates" description: "Australian property prices rose during every rate hiking cycle since 1988. The 40-year data destroys the 'wait for rate cuts' argument. Data analysis with charts." author: Yan Zhu date: 2025-08-18 category: Finance & Tax url: https://premiumrea.com.au/blog/property-prices-ignore-interest-rates-australia tags: ["interest rates", "RBA", "property prices", "data analysis", "rate cuts", "Melbourne", "housing market"] --- # 40 Years of Data Prove It: Property Prices Don't Care About Interest Rates *By Yan Zhu, Co-Founder & Chief Data Officer at PremiumRea — 2025-08-18* > I keep hearing people say they'll buy when rates come down. The historical data says that's one of the most expensive mistakes you can make. Let me show you the charts. Just last week, the RBA made its rate decision. And within minutes, my inbox filled with the same question I've been getting for two years: "Should I wait for rates to come down before buying?" The answer is no. And the data is overwhelming. Over the past 40 years, Australian property prices have risen during every single rate hiking cycle. Every one. Without exception. The idea that higher rates mean lower prices is not just wrong — it's the most expensive misconception in Australian property. ## The 40-year chart that changes everything Let me walk you through the rate cycles. **1988 rate hikes:** Cash rate peaked at 17.5%. House prices rose. **2000-2008 hiking cycle:** Cash rate went from 4.5% to 7.25% over seven years. House prices more than doubled. **2009-2010 tightening:** Post-GFC recovery, rates rose from 3% to 4.75%. House prices jumped 10-15% in that period. **2022-2023 fastest hike in a generation:** Cash rate from 0.1% to 4.35% in 18 months. Melbourne house prices — after a brief dip in late 2022 — were rising again by mid-2023 [1]. Zero correlation. None. The R-squared between cash rate changes and annual house price movements is statistically insignificant across every major Australian city over the 40-year dataset. So why does everyone believe the opposite? ## The logic that sounds right but isn't The intuitive argument goes like this: higher rates mean higher mortgage repayments, which means fewer buyers can afford to borrow, which means less demand, which means lower prices. Each step in that chain sounds reasonable. But the chain breaks at step three. Here's why. The RBA raises rates because the economy is running hot. Hot economy means strong employment, rising wages, and confident consumers. The same conditions that trigger rate hikes also generate property demand. The rate hike is a symptom of economic strength, not a cause of economic weakness [2]. Moreover, rate hikes disproportionately affect the top end of the market. A 0.25% rate increase on a $600,000 loan adds approximately $30 per week to repayments. That's manageable for most households. On a $1.5 million loan, the same increase adds $75 per week — more material for households already stretched at the top of the serviceability buffer. This is why we see a two-speed market during rate hiking cycles: the affordable segment ($600K-$900K) continues to grow because the demand is driven by population necessity and the repayment sensitivity is low. The premium segment ($1.5M+) softens because the buyers are rate-sensitive and discretionary. Our entire investment strategy at PremiumRea sits in the rate-insensitive bracket. Sub-$900K houses in Melbourne's southeast, where the typical loan is $500K-$650K and a 0.25% rate change moves repayments by $25-$40 per week [3]. ## The real cost of waiting Let me put a dollar figure on the "wait for rate cuts" strategy. Melbourne's established house median has grown at approximately 7% per annum over the past 30 years. That means every year you delay purchasing a $750,000 property costs you approximately $52,500 in missed capital growth. If you wait two years for a rate cut that saves you 0.5% on your mortgage rate — that's a saving of approximately $3,250 per year on a $650,000 loan. So you've saved $3,250 per year in interest. But you've lost $105,000 in capital growth. And the property that was $750,000 is now $860,000, requiring a larger deposit, larger loan, and larger stamp duty payment [4]. The maths is not close. Waiting for rate cuts is one of the most expensive decisions Australian property buyers make. The rate saving is measured in thousands. The capital growth cost is measured in hundreds of thousands. > "I've been telling clients the same thing since 2022: the rate environment is irrelevant at the affordable price point. Population growth, land scarcity, and rental demand are the drivers. Everything else is noise." If you're waiting for the 'right time' to buy, I have uncomfortable news: the data says the right time was yesterday. The second-best time is today. Every day you wait, the asset gets more expensive and your deposit buys less of it. Stop watching the RBA. Start watching the land supply data. That's where the real story is. ## References 1. [RBA Statistical Table F5, Housing Price Indices — Eight Capital Cities. 40-year cash rate vs house price comparison.](https://www.rba.gov.au/statistics/tables/) 2. [RBA Research Discussion Paper, 'The Effect of Interest Rates on Housing Prices'. Lag analysis and demand-supply decomposition.](https://www.rba.gov.au/publications/rdp/) 3. [PremiumRea portfolio: sub-$900K bracket, typical loan $500-650K, rate sensitivity analysis.](#) 4. [CoreLogic Home Value Index, Melbourne. 30-year compound annual growth rate ~7%.](https://www.corelogic.com.au/our-data/corelogic-indices) --- Source: https://premiumrea.com.au/blog/property-prices-ignore-interest-rates-australia Publisher: PremiumRea (Optima Real Estate) — Melbourne buyers agent