The recent cut in interest rates has significantly rejuvenated the residential real estate market, driving home prices to unprecedented levels across the nation, according to the PropTrack Home Price Index.
The national housing market experienced a notable upswing with a 0.27% increase in March, setting new records in both capital cities and regional areas.
The price index now showed a 3.91% rise from the previous year and a remarkable 48% surge over the last five years.
This growth trend is prominently led by major cities, although regional markets also contributed to the upward trajectory with a more modest growth rate.
The capital cities have been at the forefront of this price growth, with Canberra and Sydney recording the highest monthly price increases of 0.54% and 0.47%, respectively.
On the other hand, Brisbane, Adelaide, and Perth experienced slower growth rates yet sustained significant annual increases of 9.39%, 11.32%, and 11.53%, respectively, PropTrack data showed.
While Melbourne, Canberra, and Sydney enjoyed a robust recovery in quarterly price growth, markets in Adelaide, Brisbane, and Perth saw a slowdown during the same period.
This disparity highlights the uneven pace of recovery across different markets.
Despite the buoyancy in capital cities, regional markets continue to slightly outperform with a 4.59% annual growth rate compared to 3.64% in cities.
Factors such as affordability and increased housing options had previously cooled the capital city markets, but the February rate cut has reignited both demand and price growth.
“Home prices across the country climbed in March, following a clear shift in market momentum triggered by the Reserve Bank’s February rate cut,” said Eleonor Creagh (pictured), REA Group senior economist.
The Reserve Bank has initiated a rate-cutting cycle, reducing the cash rate by 25 basis points to 4.1% in February, influenced by the lowest underlying inflation rates since December 2021, after maintaining elevated interest rates at 4.35% since November 2023.
“February’s rate cut boosted borrowing capacities and buyer confidence, helping to reignite demand and reverse the small price declines seen in the months prior,” Creagh said.
A previous PropTrack report said that the reduction in interest rates is expected to boost average borrowing capacity by 2-3%, though the actual impact may vary depending on individual financial circumstances.
As the market adjusts to new economic conditions, further rate cuts are anticipated to have a tempered impact due to ongoing affordability issues.
“We expect prices to keep lifting over the coming months, but the rate of growth is likely to be more modest compared to recent years,” Creagh said, citing structural factors such as population growth and a housing supply shortage as continuing drivers of price growth.
