A Higher Interest Rate Could Have No Effect On House Prices

Here's what First Home Buyers can expect from the interest rate increase

9 June 2022 - 5 min read

At Porter Davis, we know that buying a home is an enormous decision. This is especially true for your first home. The Australian house market is tough, and for first-time buyers, the news about recent inflation could put potential buyers off purchasing for another few years. But as it turns out, there’s good news on the horizon.

In many Australian locations, the median house price may well double in value over the next six years, even with the reported rising interest rates and inflation. This means that if you invest in your home now, you could sell it for genuine profit in just a few years to come. We know that this might seem confusing, so we’ve broken it down for you ahead.

What Influences Real Estate Performance?

Real Estate is a complex industry. While interest rates can impact performance, many other influential factors could determine how the property market will perform from one year to the next. And these factors will be different in every single city.

The factors that might pull the market down in 2022 include

  • Tighter credit assessment
  • Inflation
  • Federal election rhetoric
  • Skilled labour shortage
  • Affordability
  • Rising interest rates.

The factors that might lift the market in 2022 include

  • Overseas migration
  • High home equity
  • Upgrade buyers
  • Lifestyle buyers
  • Wage growth
  • Rental income
  • International tourism
  • Cheap home loans
  • And so much more!

From this chart alone, you can see that there are more lifting factors than those that might pull it down, meaning that you can assume the overall growth of the property market will continue to rise in 2022. This growth will happen despite all the negative forecasts in the mainstream media.

How Do I Know I Can Afford A Home? 

Mortgages can be a stressful topic for many, especially if you’ve never had to take one out before. With the recent news about inflation and interest rates rising, it’s no wonder that you may now be considering whether or not you can afford to buy your first home.;

The Reserve Bank of Australia confirmed that most homeowners have been paying well above their minimum required loan payment for many years. This means that you’ll likely be able to afford your home loan repayments and still live comfortably. In most households here in Australia, there is a large amount of slack in household budgets to absorb any interest rate rises.

Plus, the Commonwealth Bank of Australia, the largest home loan lender here, has recently announced that over 35% of loans are more than 2-years ahead on their mortgage repayments.

How Can Evidence Help Young Buyers Understand the Market? 

Just like history, the interest rates here in Australia rise and fall and repeat themselves over time. In the 1970s and 80s, the interest rates soared: from 6.5 per cent in 1970 to 17 per cent in 1990 on a standard variable rate home loan.

However, despite these rises, the property market didn’t slow down. In fact, it boomed. The median house price in Sydney increased 8-times, and this growth was also seen in several other cities, including Hobart.

And again in 2008, after six years of rising inflation rates, the property market did it again. In 6 out of 8 capital cities here in Australia, the median house price more than doubled in value. In regional locations, the performance was even better.

It looks likely this will happen again over the next six years, meaning now is a better time than ever to invest in your home.


To further understand your finance options, our finance partner, MAB will happily take you through your options. Click here for more information on what they do.

With wage growth promises, full employment, and business revenue rising, it’s still a safe time to buy your first home. And, if you want your first property to be your dream one – then building a property is also a fantastic way to go. 

We hope this article has helped to ease any financial worries – and remember, our expert team here at Porter Davis will happily have a chat with you about the financial elements of buying your first home.