Source: Australian Chinese Daily
Interest rate cuts are set to become the key catalyst for the Australian property market's recovery in 2025. The market will begin the year much like it ended 2024, with buyers holding a stronger advantage over sellers—unless the Reserve Bank of Australia (RBA) cuts interest rates.
According to CoreLogic data, Sydney saw a 2.3% increase in house prices by the end of 2024, while Melbourne experienced a 3% decline. This marked the highest point since 2022 when interest rates started rising, pressuring buyers' borrowing capacity. Meanwhile, sellers flooded the market with listings in response.
Adelaide Timbrell, Senior Economist at ANZ, emphasized that rate cuts will be the main driver behind a market rebound. As long as unemployment remains relatively stable and inflation continues trending in the right direction, the RBA is expected to reduce rates in 2025. These cuts, along with income growth, should help boost borrowing capacity, leading to a rise in property prices.
Before that, affordability pressures will force many households to squeeze together, a natural response to increasing housing costs. This could either create additional supply or reduce demand without altering the total number of properties available.
Buyers are prepared to purchase properties but are unwilling to overpay. McGlynn predicts that, as buyers seek more affordable options, the price gap between standalone houses and apartments in Sydney will continue to narrow.
Jarrod McCabe, Director at Wakelin Property Advisory, believes Melbourne will remain a buyer’s market until the interest rate cuts come into play. He noted that there will be excellent opportunities for buyers in Melbourne, with many properties being listed due to the additional costs of property ownership combined with higher interest rates.
As the Australian property market anticipates these changes, it’s clear that the combination of lower rates, increased buying activity, and realistic seller expectations will shape the market in the months ahead.
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