But housing supply remains a concern

With inflation now within the Reserve Bank of Australia’s (RBA) target range of 2-3%, the prospect of an earlier-than-expected rate reduction in February is sparking discussion on how it could impact Australia’s housing market in 2025.
Nerida Conisbee (pictured above left), chief economist at Ray White, said an early rate cut could restore market confidence, particularly in cities like Sydney and Melbourne, where activity has slowed.
“It does mean the downturn will likely be fairly quick,” she said. “In Melbourne’s case it may be that price declines stop. In Sydney, it may be that it starts to pick up again.”
Ray White has predicted a potential price increase of 0-3% in response to a single rate cut. However, Conisbee noted that the broader market impact will depend on the frequency and scale of cuts.
“One rate cut will give a boost of confidence and probably lead to a bit of price growth,” she said. “But the bigger question is around how many cuts we are likely to see, and that’s the unknown at this point.”
John McGrath (pictured above centre), founder of McGrath Estate Agents, expressed caution about the timing of the RBA’s decision, suggesting further evidence of sustained inflation control may be needed before action is taken.
“I don’t expect the RBA to cut rates for several more months until they have seen the sustained downward trend continue,” McGrath said.
When rate cuts do occur, McGrath believes it will take a total reduction of at least 75 basis points for mortgage holders to feel significant relief.
“Having said that, any downward trend should signal the beginning of a series of rate reductions which should spur on buyers,” he explained. “We will likely see a spike in buyer uplift to accompany the first rate reduction but a more meaningful increase once we’ve seen three or four rate reductions.”
Conisbee, however, warned of a possible “watch and wait” period among sellers following the first rate cut, which could delay new listings. She suggested the early months of 2025 might present opportunities for buyers before competition increases.
“If we do see three or four rate cuts, it’s going to be looking quite different to what it’s looking at the moment,” she said.
Simon Pressley (pictured above right), head of research at Propertyology, said an early rate cut would inject momentum into competitive markets that performed well in 2024.
“Some markets will see that stereotypical ‘seagulls fighting over a chip’ scenario because there’s bugger all stock and that’s what really pushes prices up,” he said.
According to Propertyology’s 2025 outlook, 20 out of 25 of Australia’s largest cities are expected to see growth, with 11 cities forecast for price increases of 8% or more. While Sydney, Melbourne, and Canberra are likely to see modest declines, Pressley highlighted Townsville as a standout, with potential growth of up to 30% — a figure that could rise further if rate cuts materialise sooner.
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