Rate Cuts Revive Activity in Struggling Housing Markets
Housing markets that have been struggling across Australia are starting to gain momentum again, following a second interest rate cut and a slight easing in cost-of-living pressures.
CoreLogic data shows house prices have now hit a record national high of $831,288, after four consecutive months of growth.
Price Growth Led by Lower-End Properties
The biggest gains have come from the lower end of the market, with prices now sitting over 4% higher than the same time last year.
Recoveries are underway in housing markets like Darwin, Melbourne, and regional NSW, which had been in a long slump.
Melbourne Market Showing a Strong Rebound
In Melbourne, house prices are rebounding after the pandemic downturn. Notably:
Inner city house prices rose by 3.5% for the quarter
Inner city units performed even better, rising 5.5%
“Melbourne is now catching up after a sustained period of underperformance relative to other capitals – a common pattern in cyclical housing markets,”
— Eleanor Creagh, Senior Economist at REA Group (via Broker News)
Lower rates and expectations of further easing have improved borrowing capacity and buyer confidence, supporting gradual market recovery.
Darwin, Newcastle, and Lake Macquarie Also on the Rise
Other notable cities showing strong growth for the quarter include:
Darwin
Newcastle
Lake Macquarie
Each recorded quarterly price growth of 3–4%.
Property Price Forecasts: Growth Likely to Continue
A new Reuters poll of property analysts predicts annual price increases of 4–5% through to 2027.
Although interest rates are still high and affordability is tight, ongoing housing shortages and healthy demand are expected to keep prices rising.
Experts Warn of a Ceiling on Growth
My Bui, Economist at AMP, believes there are limits to how far this cycle will go:
“We see a bit of a cap to the pace of home price appreciation in this cycle.”
“While rate cuts would make it slightly easier for some borrowers to service the mortgage, it is quite minimal compared to the 13 rate hikes we’ve had since 2022 and it’s also minimal versus how much prices have gained.”
Mixed Views on Affordability Improvement
The Reuters poll revealed mixed opinions on whether housing affordability will improve in the short term.
While rate cuts lower monthly repayments, price growth continues to keep deposit barriers high, especially for first home buyers.
“Interest rate cuts are going to be more beneficial to people who were already very close to buying a place,”
— Tom Devitt, Senior Economist, Housing Industry Association (via Broker News)
“The first couple of interest rate cuts will have almost immediately increased their borrowing power. So, they might be able to get across the line immediately… but relatively soon that will start putting upward pressure on prices again.”
“Affordability is likely to deteriorate over the next few years until more fundamental reforms can actually boost housing supply.”
