Rate cut expected to boost market confidence

Mortgage holders won’t be the only ones relieved by the Reserve Bank of Australia’s decision to cut interest rates for the first time in more than four years, with homebuyers and sellers expected to be buoyed by the news, according to the LJ Hooker Group.

Activity is expected to pick up in the coming weeks as vendors look to list, hopeful that reduced repayments will bring more house hunters back to the market and increase their chances of achieving a better price.

LJ Hooker Group Head of Research Mathew Tiller said with inflation now in the target range and employment remaining steady, the RBA has ended its sustained period of high interest rates, which commenced back in May 2022 and included 13 hikes.

“This extended period of high interest rates has heavily and disproportionately affected mortgage householders, so this is welcomed news, particularly for families who have been feeling the pressure,” Mr Tiller said.

“Strong capital gains meant we didn’t see the wave of forced sales that was initially feared would happen at the start of the cycle; people showed they could adjust their household budgets or, in some cases, sell and downsize their mortgage.

“Initially, we expect to see a boost from those who have finance already approved; they will look to increase their borrowing capacity and jump straight back into the market. And although it may take a little while for the banks to pass on the cut, it is likely to bring an increased activity with buyers looking to refinance or gain pre-approval.”

The RBA is tipped to announce another three rate cuts by the end of 2025, but Mr Tiller believes it will act cautiously due to uncertainty around global economics, including US reciprocal trade tariffs. The last interest rate cut recorded was in November 2020.

Price growth in 2024 was dependent on market listings rather than a sharp drop in buyer demand. While sales increased year-over-year across all markets, differences in listing volumes shaped price trends. Overall sales volumes were 7 per cent above average and the second-best results in five years.

Victoria recorded more listings than buyer demand, leading to price declines, whereas tighter supply and affordability in Queensland, South Australia and Western Australia drove property prices higher. Sydney’s real estate market has shown signs of moderating, but rate cuts will boost borrowing capacity.

“Sales have been quite buoyant in recent weeks, and today’s announcement should see the prices stabilise earlier than expected and activity pick up,” Mr Tiller said.

“With inflation easing and wage growth outpacing it, households will have more disposable income, making it easier to save for deposits and enter the market.

“Housing affordability and lack of supply will continue to be an issue in some areas, but we expect the lower end of the market will be busy with first-time home buyers and increased investor activity following this much anticipated move by the RBA.”