Author – Denton Pugh, NAB Executive for Home Lending. Originally published on News.com.au and realestate.com.au
With the Reserve Bank’s next meeting approaching, all eyes are on interest rates.
After 13 consecutive hikes, many are hopeful relief is on the way. Buyers – whether a first home buyer or seasoned investor – will be paying close attention to this week’s decision.
So, what does this mean for Australia’s property market? While past experience tells us house prices typically bounce in the first three to four months after a cut, this time around, any uplift might be a bit more modest.
Historically, when rates drop, buyers who have been sitting on the sidelines often come back into the fray – and for good reason. When rates come down, buyers can borrow more. That extra bit of purchasing power can make the difference between waiting a few more months, or finally placing an offer on that dream home.
For those close to affording their dream property, especially first home buyers, even a small dip in interest rates can create new buying opportunities. And although we’re not expecting the first cut to create a buying frenzy, we should see activity increase.
Sydney and Melbourne – Australia’s most expensive property markets – are likely to feel the impact of lower rates more quickly. These cities have historically shown stronger responses to reduced rates, particularly in higher-end property markets. Although there’s currently a higher number of listings which has kept price growth in check, creating more choice for buyers. Listings would need to come back to normal levels before we would see significant price growth in those locations.
Listings in smaller cities, such as Perth and Adelaide, are rebuilding from historic lows.
Rate cuts aside, buyer preferences will also continue to shape 2025’s property market.
Many buyers are still prioritising lifestyle, quality homes, and good amenities – whether they’re looking in the city or regional areas. Smaller homes like townhouses and apartments should remain popular as buyers widen their search to find something they want, and that also fits their budget. On the other hand, larger homes that need major renovations may attracter fewer buyers, as construction costs are still relatively high.
A lower cash rate wouldn’t just benefit individual buyers, it could have a much bigger impact on the housing market as a whole. With Australia experiencing a housing shortage and the government aiming to build 1.2 million new homes, lower interest rates could make it easier for developers to get large-scale projects off the ground. More housing supply over time would help ease pressure on prices, create more options for buyers, and support economic growth by boosting jobs in construction and related industries.
A potential rate cut won’t create an immediate property boom, but it is likely to bring more buyers back to the market. And while the 2025 property market will be characterised by a number of factors – not just rates – it is set for a shift, one that could provide opportunity for those looking to buy their first home.
