The property market is set to remain stable over the coming months following the Reserve Bank of Australia’s decision to keep rates on hold, with well-priced properties to attract strong buyer interest despite softer market sentiment.
At its fourth meeting of the year, the Reserve Bank finally gave borrowers some relief by holding the cash rate still.
While the RBA unanimously left the cash rate unchanged despite persistent inflation and elevated energy costs, governor Michele Bullock warned further tightening remained a possibility if price pressures do not continue to ease.
“The central bank ultimately left the cash rate unchanged as it assesses the impact of earlier increases, while signalling it stands ready to tighten policy further if inflation persists.”
According to Domain chief economist Dr Nicola Powell, while the RBA was aware that higher interest rates were slowing spending and cooling housing market conditions, it remained concerned that inflation could prove more persistent than expected.
She said today’s decision underscored the RBA’s challenge of weighing a slowing economy against stubborn inflation, with elevated energy costs and global uncertainty continuing to keep price pressures alive.
“This suggests that while today marks a pause, it is not yet a pivot. The path from here will depend heavily on incoming data, particularly inflation and labour market conditions over coming months,” Powell said.
From a housing market perspective, Powell said the cash rate hold transition mattered, with a prolonged pause to consolidate the current market.
“[Today’s] environment is already translating into more subdued conditions. Borrowing capacity remains constrained, price momentum has eased, and buyer demand is becoming more cautious, particularly in Sydney and Melbourne.”
LJ Hooker head of research, Mathew Tiller, said the rate hold provided the property market with a “much-needed breathing space”, as the three previous hike had reduced borrowing capacity and buyer confidence.
“Auction clearance rates have eased in many markets, indicating buyers are becoming more selective. Listings have increased, providing more choice and reducing some urgency seen earlier in this housing cycle,” Tiller said.
While strong population growth and a chronic undersupply continue to underpin the property market, Tiller said that price growth has moderated in the wake of the federal budget.
“Well-priced properties continue to attract strong interest, particularly in markets where supply remains constrained, such as Perth, Brisbane and its surrounding areas, and Adelaide, where strong demand continues to drive results.”
Tiller said that buyers who have adapted to higher interest rates could be taking advantage of improved negotiating conditions, while vendors with realistic price expectations continued to secure successful sales.
Similarly, Knight Frank chief economist Ben Burston said the decision was a welcome reprieve for the property market while giving the RBA more time to assess the impact of earlier rate hikes and persistent inflation.
He said weakening consumer and business confidence, coupled with falling house prices in Sydney and Melbourne, should make the RBA wary of further tightening, while easing expectations of additional rate hikes were likely to boost investor confidence.
“Meanwhile, leasing market fundamentals remain favourable in most markets with rental growth continuing to support investment returns and attract capital to the main commercial sectors, so the latest run of rate rises has been far less disruptive than in 2023,” Burston said.
While the RBA has not ruled out another rate hike, ANZ, NAB and Commonwealth Bank believe the tightening cycle is over, with rate cuts tipped for 2027.
Westpac remained the only bank predicting two more 0.25 per cent rate increases this year.
According to the data, the previous three 0.25 per cent increases have added around $478 to monthly repayments on the average loan of around $1,000,000.
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