Are House Prices Falling Because Interest Rates Are Rising? Alan Kohler's Last ABC Column Tested

Are House Prices Falling Because Interest Rates Are Rising? Alan Kohler’s Last ABC Column Tested

Scope and Purpose

In his last column for the ABC, published on 12 October 2026, the finance presenter Alan Kohler looked back over 31 years at the broadcaster and set out the stories he says he and others missed (ABC News). One concerns housing. He argues that the replacement of capital gains tax indexation with a 50 per cent discount in 1999, operating alongside negative gearing, gave investors a strong incentive to buy property with borrowed money, and that the reversal of those settings in 2026, together with rising interest rates, is now bringing prices down. The column adds that the discount and its removal are not the only reasons prices rose and are now falling. This output takes the four checkable propositions in that passage and puts each against its primary source and against Australian Property Network’s (APN’s) certified readings. The short answer: prices are falling and interest rates are rising, as he says, although national prices are no lower than a year ago. Real dwelling prices rose far faster in the 25 years after the 1999 discount than in the 25 years before it, but the rise had begun about three years earlier. Its removal has been legislated, not completed: the change takes effect from 1 July 2027 and keeps the discount for new dwellings.

“That change kicked off 25 years of a nation-altering surge in house prices. Twenty-six years later, those distortions have finally been removed and guess what? House prices are falling, helped by rising interest rates.”

Alan Kohler, ABC News, 12 October 2026

Clinical reframing: the passage makes four propositions. Dwelling prices are falling; rising interest rates are contributing to the fall; the 1999 capital gains tax discount began a sustained rise in dwelling prices over the following 25 years; and that tax setting, with the treatment of negative gearing, has been reversed in 2026.

Proposition One: House Prices Are Falling

The mean price of a residential dwelling in Australia was $1,100.4k in the June quarter of 2026, down 0.7% from $1,108.6k in March, the highest level in the series (ABS). It was the first quarterly fall since the March quarter of 2023. The two monthly private indices carry the record to September. Cotality’s Home Value Index fell 1.1% in September, which Cotality described as “the sixth straight month of falling values”, leaving national values 5.2% below their March 2026 high (Cotality). PropTrack’s Home Price Index fell 0.2% in September, its sixth consecutive monthly fall, and was 3.3% below its March peak (PropTrack). Hedonic Dwelling Value Indices (21111), which reads the annual change in Cotality’s index, is −0.5842σ for the September quarter, position 25.7 against 36 quarters, the lowest since the June quarter of 2023.

The claim holds. Over a full year, however, national prices are flat rather than lower: Cotality records no change (0.0%) and PropTrack a rise of 0.1% in the year to September, and the ABS mean price in June was still 6.8% above June 2025. Average Dwelling Prices (21112), which reads that annual ABS change, is +0.1474σ for the June quarter, position 56.4 against 56 quarters. The fall is six months old and began from the record highs Cotality recorded in March 2026.

Proposition Two: Helped by Rising Interest Rates

The Reserve Bank raised its cash rate target four times in 2026: to 3.85% from 4 February, 4.10% from 18 March, 4.35% from 6 May and 4.60% from 30 September, one percentage point in all, after three reductions in 2025 (Reserve Bank of Australia). The monthly price falls began in April, after the February and March increases and before the Budget of 12 May announced the tax changes discussed below. Both index publishers name higher interest rates among the causes. Cotality attributes the downturn to “affordability constraints, higher interest rates, elevated living costs, and weaker consumer sentiment”; PropTrack states that “Higher interest rates are weighing on borrowing capacity and buyer demand.”

Cost of Capital (24711), which combines the cash rate, the indicator lending rate and the two-year government bond yield, reads +1.8875σ for the September quarter, the highest of its 53 quarters. Interest Rates (21210) reads +0.9807σ for the June quarter, position 96.6 against 30 quarters. The previous period of increases offers a comparison: the cash rate rose from 0.10% in April 2022 to 4.35% in November 2023, and real dwelling prices fell 12.3% between the March quarters of 2022 and 2023 (BIS). The claim holds on the sequence of events. How much of the fall is due to interest rates, rather than to affordability, sentiment or the announced tax changes, cannot be measured from price data, and is recorded as NIL RETURN.

Proposition Three: The 1999 Discount Began 25 Years of Rising Prices

The 50 per cent discount applies to assets acquired after 11.45 am on 21 September 1999; for assets acquired earlier, cost base indexation was frozen at 30 September 1999 (Explanatory Memorandum, Treasury Laws Amendment (Tax Reform No. 1) Bill 2026). On the Bank for International Settlements index of Australian residential property prices, adjusted for consumer price inflation, real prices rose 33% in the 25 years to September 1999, an average of 1.1% a year, and 149% in the 25 years that followed, an average of 3.7% a year (BIS). Real prices rose 50% in the five years from September 1999 to September 2004.

The timing is consistent with the claim, but the rise did not begin with the discount. Real prices had already risen 17% in the three years to September 1999, and the strongest five-year rise in the series since 1974, 59%, ran from September 1998 to September 2003, beginning a year before the change. Measured over any 25 years, the largest rise began in late 1996: 195% from September 1996 to September 2021. Other conditions also changed over the 25 years that followed, interest rates and migration among them, and the column itself says the discount was not the only cause. APN does not attribute shares of the rise to individual causes, and the causal claim is recorded as NIL RETURN. The claim partly holds.

Proposition Four: The Settings Have Been Removed in 2026

The column says that “those distortions have finally been removed”. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026, announced in the Budget of 12 May 2026, passed both Houses on 25 June and received assent on 26 June (Parliament of Australia). It replaces the 50 per cent discount with cost base indexation for resident individuals and trusts, but only for gains accruing from 1 July 2027. Gains accrued before that date keep the discount, and individual investors in new residential dwellings may choose to keep it. Negative gearing is limited from income years beginning on or after 1 July 2027: losses on a residential dwelling can be set only against income and gains from residential property, with the remainder carried forward, unless the dwelling was acquired before 7.30 pm on 12 May 2026 or is a new dwelling.

The claim partly holds: both changes were legislated in 2026, but neither has yet taken effect, and both keep the earlier treatment for new dwellings and, for negative gearing, for existing holdings. Any effect on prices in 2026 can therefore come only from the announcement and passage of the changes, not from their operation.

Not Tested

The column’s migration figures, its account of migration policy since 2001, its argument about global saving and real interest rates, and its account of political events are outside the passage on housing and are not tested here.

APN Analytical Synthesis

Each of the column’s propositions has a basis in the record, and two need qualifying. Dwelling prices have fallen for six consecutive months to September and by 0.7% in the ABS June quarter measure, but on the monthly indices are level with a year earlier. The cash rate has risen by one percentage point in 2026, and the price falls followed the first two increases. Real dwelling prices rose far faster in the 25 years after the 1999 discount than in the 25 years before, but the rise was already under way when it began. The 2026 legislation reverses the discount and limits negative gearing from 1 July 2027, with new dwellings excepted and, for negative gearing, existing holdings too, so it has not yet operated. Hedonic Dwelling Value Indices (21111) reads −0.5842σ and Cost of Capital (24711) +1.8875σ, the highest in its record. The column is right about the direction of prices and rates, and early on the tax change: the settings it describes as removed are, for now, scheduled to change.

The next data will extend the test: the Cotality and PropTrack releases for October, in early November; the ABS Total Value of Dwellings for the September quarter, in December; and the first income year under the new rules, from 1 July 2027. This synthesis speaks only to the structural conditions the cited data can independently support; it does not constitute a view on future property values, taxation or interest rates, and no such view is expressed or implied.

Sources and Licences

ABS material is used under a Creative Commons Attribution 4.0 International licence; calculations are APN’s. Real residential property prices: Bank for International Settlements, cited as the source. Cotality and PropTrack figures are quoted from the publishers’ published releases of 1 October 2026 and remain the property of the publisher.

Disclaimer

The analysis and information contained in this publication are for general informational and strategic purposes only and do not constitute financial, investment, legal, or any other form of professional advice. Australian Property Network is not a licensed financial advisor. Property values and market conditions can go up or down. Before making any property or investment decisions, you must conduct your own thorough research and seek independent professional advice tailored to your specific circumstances. Images are for illustrative purposes only. E.&O.E.

Findings are presented on the basis of data and evidence alone.