The Australian property market is on the brink of change, with experts predicting the Reserve Bank of Australia (RBA) will start cutting interest rates soon. Major banks and financial analysts believe the first cut could come as early as this week! But what does that mean for property investors?
How Likely Are Rate Cuts and By How Much?
There is growing confidence that the RBA will start reducing interest rates as early as February. Most economists agree that inflation is tracking downwards, giving the RBA room to start easing rates.
The big four banks have slightly different predictions on how many cuts will happen this year:
- Commonwealth Bank & Westpac: Forecasting four 0.25% cuts in 2025.
- NAB: Predicting five cuts throughout the cycle.
- ANZ: More conservative, expecting just two rate cuts.
If these predictions hold true, Australia’s official cash rate, currently at 4.35%, could fall to around 3.35%-3.85% over the next 12 months. That would make borrowing cheaper, boosting demand for property and likely increasing prices.
A Small Window of Opportunity
Recent data from CoreLogic shows that while property prices have cooled in some areas, any drop is expected to be “shallow and short-lived.” So, if you’re waiting for prices to fall further, you might be out of luck. Once interest rates go down, borrowing will become easier, more buyers will enter the market, and prices could start rising again.
Investor activity is already on the rise. The Australian Bureau of Statistics (ABS) reports that new investor loan values hit $11.6 billion in the September quarter—up 29.5% compared to last year. With rental returns still strong, many investors see real estate as a solid option.
What Happens to Property Prices When Rates Drop?
Looking at past trends, when interest rates fall, property prices tend to go up. CoreLogic estimates that for every 1% drop in the cash rate, property values rise by around 6.1%. Higher-end areas in cities like Sydney and Melbourne, have historically bounced back quickly after rate cuts.
Big banks have different predictions, but most expect multiple cuts this year. Commonwealth Bank and Westpac predict four 0.25% cuts, NAB expects five, and ANZ is forecasting two. If these happen, the average Aussie home (worth around $814,000) could see a price increase of nearly $50,000. In some suburbs, values could jump by as much as 20%.
What This Means for Investors
- Bigger Borrowing Power – Lower rates mean banks will lend more, making it easier to buy an investment property or expand your portfolio.
- Cheaper Loan Repayments – Your monthly loan costs could go down, helping with cash flow.
- More Competition – With more buyers in the market, prices could rise, so getting in early might be a smart move.
- Strong Growth in Key Areas – Premium suburbs usually see the biggest price increases when rates drop.
How to Make the Most of the Opportunity
If you’re considering investing in property or expanding your portfolio, here are some steps to take advantage of this market shift:
- Act Before the Market Heats Up – Once rate cuts take effect, demand is likely to surge. Buying now could help you secure a better deal before competition rises.
- Get Pre-Approved for Finance – With borrowing power set to increase, securing pre-approval now will help you move quickly when opportunities arise.
- Research High-Growth Areas – Some suburbs respond more strongly to rate cuts than others. Look for locations with solid rental yields and growth potential.
Is Now the Time to Buy?
With interest rates expected to fall and investor confidence already climbing, the chance to secure a great investment at today’s prices may not last long. If you’re thinking about buying or expanding your portfolio, now is the time to explore your options before competition heats up.
We can help you understand how these changes affect you and find the best investment opportunities in the current market. Get in touch with us today to discuss your property strategy and make the most of what’s ahead!
Article References: ‘Short-lived’: Property prices pause as nation awaits rate cuts – realestate.com.au, CoreLogic Market Insights, Lending indicators | Australian Bureau of Statistics, CBA Economic Forecasts, Westpac Economic Insights, ANZ Research, AMP Chief Economist Shane Oliver Insights, Bendigo Bank Economic Updates.
The information contained in this webpage is general in nature and has been provided in good faith, without taking into account your personal circumstances. While all reasonable care has been taken to ensure that the information is accurate and opinions fair and reasonable, no warranties in this regard are provided.Â
