February Rate Cut Speculation: Potential Impacts on Australia’s Property Market in 2025

As the Reserve Bank of Australia (RBA) contemplates a potential interest rate cut in February, experts are forecasting significant shifts in the Australian property market. With inflation now within the RBA’s target band of 2-3%, both the Commonwealth Bank and ANZ suggest a rate cut is imminent. This move could reshape the housing landscape for the year ahead.

Price Movements

Nerida Conisbee, Ray White’s chief economist, anticipates that an early rate cut could restore confidence in markets like Sydney and Melbourne, where activity has recently slowed. “The downturn will likely be fairly quick,” she notes, predicting that Melbourne’s price declines may halt and Sydney’s growth could resume. Ray White projects a modest price growth of 0-3% following a rate cut. However, the extent of this growth hinges on the number of cuts, with ANZ forecasting two and NAB suggesting up to five, starting in May.

Buyer Activity

John McGrath, founder of McGrath Estate Agents, expects the RBA to delay rate cuts until a sustained downward trend is evident. He believes a reduction of at least 75 basis points is necessary for families to feel mortgage relief. “Any downward trend should signal the beginning of a series of rate reductions, spurring buyer activity,” McGrath asserts. Initial rate cuts may trigger a buyer uplift, with more significant increases following multiple reductions.

 

Listings and Competition

As buyer demand rises, McGrath predicts more sellers will enter the market, overcoming current hesitations due to recent market softening. Auction clearance rates have dropped from 70-75% to 60-55%. Conisbee suggests sellers might “watch and wait” after the first rate cut before listing their homes. The first quarter could be opportune for buyers before increased activity heightens competition and prices.

Simon Pressley, Propertyology’s head of research, anticipates that an early rate cut would inject “energy and enthusiasm” into competitive markets. Some areas may experience intense competition due to limited stock, driving prices up. Propertyology forecasts growth in 20 of Australia’s 25 largest cities, with Townsville potentially seeing a 30% increase if rates drop sooner than expected.

Government Schemes and Supply Challenges

The Federal Government’s Help to Buy scheme, set to launch this year, offers first homebuyers support, though its impact on pricing is expected to be minimal due to a cap of 10,000 participants annually. Conisbee warns that undersupply remains a key driver of price growth. “Cutting rates will accelerate pricing,” she cautions, emphasising the need to meet the government’s target of 1.2 million new homes to prevent elevated property prices.

As the RBA’s February meeting approaches, the property sector is poised for potential changes. Whether the rate cut occurs or not, its anticipation highlights the delicate balance the RBA must maintain in guiding Australia’s economic trajectory. Stakeholders across the market are preparing to adapt to the evolving landscape of 2025.

 

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