The recent interest rate cut could significantly influence the housing markets in Sydney and Melbourne, according to Louis Christopher (pictured above), managing director at SQM Research.
The Reserve Bank (RBA) slashed the official cash rate (OCR) on Tuesday by 25 basis points, or 0.25%, to 4.1%, following a period where rates were held at 4.35% since November 2023.
With this adjustment, a notable shift in auction clearance rates is anticipated, potentially climbing to 50-60% in the coming weeks.
Following earlier declines this year, Christopher forecasts a rise in housing prices by year’s end. Predictions include a 3-7% increase in Sydney and a modest 2-6% uplift in Melbourne.
This aligns with findings from CoreLogic’s recent industry report, Decoding 2025, which revealed that a significant majority of real estate professionals in Australia – 65% – expect house prices to rise in the coming year.
This change is likely spurred by improved lending conditions and a surge in first-home buyer activity, thanks to the rate cut.
The tight rental market across most capitals is expected to drive further activity.
Regions like Perth and Brisbane are expected to perform exceptionally well, with Adelaide not far behind.
“The rate cut not only offers relief to existing borrowers but boosts confidence among potential buyers that interest rates are on a downward trajectory,” Christopher said.
With an unemployment rate trending downward and migration rates high, RBA’s decision comes as part of a broader strategy to stabilise the housing market amidst ongoing rental crises.
“The imminent federal election could cause a temporary slowdown in market activity, a common trend observed during election periods,” Christopher said.
Looking ahead, Christopher suggested that further rate cuts are possible, especially if inflation remains below RBA’s target range.
“Central banks often follow through with multiple adjustments once they commence a cutting cycle, particularly if economic conditions such as inflation warrant it,” he said.
The initial rate cut ignited market excitement, with predictions of two more cuts this year. However, RBA Governor Michele Bullock clarified that the decision does not imply further rate cuts are imminent.
“What I can say is that we’ve done one, we’ve removed a bit of restrictiveness — and we are still restrictive — and [now] we are waiting for more evidence that we’re getting inflation sustainably back in the ban before we are willing to move again,” Bullock said.
