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The Reserve Bank of Australia (RBA) has confirmed a widely anticipated interest rate cut, trimming the cash rate by 25 basis points to 3.6 per cent. REB examines what this means for the real estate industry – from mortgages to commercial property.
The RBA’s recent decision comes amid ongoing economic pressures, including rising unemployment and cost-of-living challenges, which have intensified calls for monetary easing.
For home owners and investors, the cut offers some breathing room on repayments and could boost borrowing power, but experts remain clear that the broader economic headwinds remain significant.
In short, how this rate adjustment plays out will depend largely on whether the RBA follows through with further cuts and how lenders pass these changes onto borrowers.
So what comes next?
While the big four banks all forecast an August cut, they remain split on the extent of further cash rate cuts.
Westpac is the most optimistic, predicting four cuts over this cycle, including this week’s (12 August) as well as November, February and May, taking the cash rate down to 2.85 per cent.
NAB has forecast three cuts, with 25-basis-point reductions in August, November and February, lowering the rate to 3.10 per cent.
Commonwealth Bank and ANZ are more conservative, expecting cuts in August and November, ending the cycle at 3.35 per cent.
Today’s decision follows the RBA’s surprise move in July to hold the cash rate at 3.85 per cent.
Just weeks after the hold announcement, June’s labour force data revealed the unemployment rate had risen from 4.1 per cent to 4.3 per cent, adding weight to calls for monetary easing.
How will residential markets respond?
Domain estimates that the cut will lift borrowing power by $4,000 for single earners of $50,000, and by $49,000 for double-income households earning $400,000.
Meanwhile, the Commonwealth Bank expects property prices to keep climbing, forecasting national growth of 6 per cent in 2025 and 4 per cent in 2026.
Smaller capitals are tipped to lead the growth, with Brisbane, Perth and Adelaide projected to rise by 8 per cent, 7 per cent and 6 per cent, respectively.
Nevertheless, researchers have suggested that declining affordability would still limit the number of buyers entering the market.
“For prospective buyers, a reduction in borrowing costs may encourage more would-be purchasers to enter the market, boosting transaction activity,” Cotality’s research director Tim Lawless said.
“However, first home buyers still face significant deposit hurdles due to high (and rising) housing prices and recent cost of living pressures that have depleted savings and continue to weigh on expenses for many households.”
“Overall, we expect housing markets to respond positively to the rate drop, which is occurring against a backdrop of low supply. However, stretched housing affordability and prudent lending standards are likely to temper the upswing.”
While many borrowers might be popping the champagne at a rate cut, Aaron Scott, co-founder of Aussie real estate agent comparison service bRight Agent, urged caution.
With cost of living increasing, a single rate cut will not be a solution for many Australians and can be symptomatic of more underlying economic issues.
“The RBA’s decision to cut rates today brings a very welcome sigh of relief for millions of Aussie home owners – but let’s be honest, it’s not a magic bullet for those suffering from mortgage stress,” he said.
“While this cut will put a few extra dollars back in people’s pockets, it won’t undo years of cost-of-living pain. For many families, their budget is already stretched to breaking point.
“The tone and direction of the RBA’s rate cut is as important, or even more important, than the cut itself.
“Aussie home owners really need to be assured that rates will continue to come down over the coming months.”
What about commercial markets?
The cut has breathed new life and optimism into the commercial real estate market after months of uncertainty.
“Another interest rate cut will help to renew market momentum in the second half of the year after a subdued June quarter for investment activity,” Knight Frank’s chief economist Ben Burston said.
“Uncertainty over the impact of tariffs on the global economy has weighed on sentiment in recent months, and while Australia is less exposed to the direct economic impacts than other countries, the resulting uncertainty over the outlook for global growth has led to slower decision-making.”
According to the chief economist, trade clarity and favourable interest rates will improve the country’s economic outlook and property markets.
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