Property prices in Australia are still climbing. And they might keep rising, even without an interest rate cut.
The Reserve Bank of Australia (RBA) hit pause on rates Tuesday, but momentum in the housing market remains strong. Economists had tipped that lower rates would fuel demand by boosting borrowing power and helping more buyers into the market, pushing prices even higher.
Yet even without a cut, the key drivers are still in play: a stubborn housing shortage, strong investor confidence, and the prospect of rate cuts later in 2025. Together, they’re keeping upward pressure on property prices Down Under.
"What the governor [Michele Bullock] made clear [during her press conference] was that it was a timing issue, not a direction issue. And that interest rates in Australia will continue to move lower. As a result, we continue to expect home prices to lift from here, regardless of them pausing in July," Belinda Allen, senior economist at Commonwealth Bank (CBA), told Australian Broker. "And what we've seen in the data so far for this year is – after a rate cut, generally – we have seen home prices rise. We saw that in February; we saw that in May. So it may well lead to a softer rise until the rate cutting cycle resumes."
CBA is forecasting two more cuts in 2025 – one in August and another in November – likely timed around the release of quarterly CPI data, which will give the RBA a clearer read on inflation. And that, in turn, could drive property prices even higher.
As for the gap between now and August, prices are still expected to keep rising – maybe just not as dramatically. "We're talking about the space of five weeks between now and August, where the general expectation is that they will cut rates," Allen said. "So it shouldn't impact [the pace of price increases] too much."
Madeline Dunk, an economist at ANZ, agreed that there will likely be continual pressure on property prices.
"I don't expect property prices to fall," Dunk said. "The pace of growth could be a bit slower. But I don't think it's going to have a significant impact on the property market, the fact that the RBA kept rates on hold."
ANZ is also forecasting two more rate cuts in 2025, one in August and another one in November, bringing the rate down to 3.35%.
"And generally, when the cash rate is cut, that is good news for housing prices," she said. "We've seen pretty positive momentum in the housing market since February, if you look at things like auction clearance rates, for example, being pretty buoyant recently. And while [the rate pause] might dampen sentiment a touch, I think that the general upward trend in housing prices is going to continue."
Rising property prices are good news for existing homeowners, hoping to cash out or trade up. But for newbie homeowners, it can make jumping on the property ladder seem impossible.
Property prices rose 4.6% nationally in the 12 months leading up to June, according to PropTrack data. Meanwhile, median home values in five of Australia's capital cities – Sydney, Melbourne, Brisbane, Canberra and Adelaide – cracking the $1 million mark.
"History tells us that prices almost always rise when interest rates are cut, and especially if they're cut quite a lot; house prices go up," said Saul Eslake, a Hobart-based economist and vice-chancellor's fellow at University of Tasmania.
The RBA surprised everyone during its July meeting, when the Board voted 6 to 3 to keep the official cash rate (OCR) on hold at 3.85%. The majority of the market – including all four of Australia's Big Four banks – were anticipating a rate reduction. In fact, only four out of 32 economists surveyed by Bloomberg expected rates to stay put.
The central bank has already cut rates twice this year, once in February and once in May, and with easing inflation and steady jobs data, a third cut seemed all but certain. But the Board hit pause, citing continued uncertainty and timing issues.
But even without a July cut, brokers and lenders are seeing rising optimism in the market in 2025, setting the stage for property prices to climb further.
"There are more buyers wanting to purchase now [in 2025], but fewer properties on the market, compared to last year," said Jacob Decru, a Melbourne-based broker at Loan Market. "Sellers may be waiting until spring to list, but there are buyers wanting to purchase now."
Joseph Daoud, founder of Sydney-based brokerage Its Simple Finance, added: "With limited dwellings and more opportunities for new buyers to enter the market, [rate cuts] create more demand and with that house prices are bound to increase. Falling interest rates don’t necessarily level the playing field. In fact, they often tilt it even more in favor of existing property owners who can leverage equity to move faster and scale their holdings.”
