Australia’s inflation rate has cooled again, and economists say a rate cut next month is now almost certain. With inflation now at 2.1%, well within the Reserve Bank of Australia’s (RBA) target range, a shift in monetary policy is imminent—and the property market is already responding.
Why a Rate Cut Is Now Likely
The RBA’s preferred inflation measure, the trimmed mean, dropped to 2.7%, the lowest since 2021. With markets now pricing in a 92% chance of a rate cut at the August 12 meeting, experts say holding rates at 3.85% would be difficult to justify.
Economists from AMP and Oliver Hume agree the latest inflation and job data provide the confirmation the RBA was waiting for. Many households—especially mortgage holders—are hoping for relief after a frustrating decision to keep rates on hold in July.
What Happens to Property Prices When Rates Fall?
Historically, falling rates lift home prices. In five out of the past seven rate-cutting cycles since 1982, prices were higher a year later. In some cases, growth exceeded 16%. While affordability limits and cost-of-living pressures may dampen gains this time, a rise still looks likely.
Already, more buyers are returning to the market. Some now qualify to borrow $50,000 to $100,000 more than earlier this year. First-home buyers, upgraders, and investors alike are acting, not just watching.
Investor Confidence Remains Strong
Interestingly, more than half of property investors were positively or neutrally geared in FY23, despite a steep rise in interest rates. How? Rents surged across Australia—up 7% in FY21, 9% in FY22, and again in FY23—helping offset higher mortgage costs.
Older investors in particular are well positioned, often carrying little or no debt. Many are leveraging equity or downsizing to free up capital, securing strong rental yields and holding for long-term capital growth.
Supply Challenges Add Pressure
Government initiatives like the build-to-rent program aim to add 1.2 million homes by 2029, but current estimates show they’re well behind target. With demand rising and supply still constrained, housing shortages may continue to support price growth—especially in affordable and high-yielding regional areas.
What This Means for You
While the coming rate cuts might not spark the boom of 2021, they are already breathing life back into the market. For buyers, this may be the time to reassess borrowing capacity and buying power. For investors, it’s a signal to review portfolio strategy.
Rodney McLoughlin provides trusted guidance in navigating these shifts, helping clients move with confidence as conditions evolve.
Real Estate Newsletter
This article is a curated summary of various news stories from the past week, offering insights and updates on the real estate market. 1 August 2025.
Rodney McLoughlin is a trusted real estate professional with deep insights into the Australian property market. For personalized advice and market expertise, reach out to Rodney today.
