Australia’s property market has sprung back to life, spurred by the Reserve Bank’s first interest rate cut in four years. While this move has re-energised buyer confidence, experts caution the boost may be temporary without sustained affordability improvements.
Buyer Confidence Returns Ahead of Rate Decision
Even before the RBA’s February decision, momentum had already begun building. According to Cotality (formerly CoreLogic), home values started to stabilise, suggesting buyers were acting on expectations of a rate cut. This optimism peaked in high-value markets like Sydney and Melbourne, where borrowing power is more sensitive to rate movements.
Rodney McLoughlin notes this early shift reflects just how responsive the market is to monetary signals, particularly for upgraders and seasoned investors.
First-Home Buyers Still Cautious
Despite renewed energy in the market, many first-home buyers remain on the sidelines. Mortgage experts point out that many are waiting to see how affordability measures from the federal government pan out. Meanwhile, higher-end buyers are seizing the opportunity to leverage improved borrowing conditions.
Long-Term Price Growth Remains Strong
New data shows that despite recent dips, long-term growth has been substantial. Over the past decade:
- Sydney home values are up 61.6%
- Brisbane values have risen 91.2%
- Adelaide has surged 93.6%
- Perth saw a 55.6% increase
Much of this growth is attributed to housing undersupply, record-low rates during the pandemic, and strong employment markets. McLoughlin emphasises the impact of these fundamentals, noting that limited stock continues to fuel competition, especially in fast-growing cities.
High Construction Costs Challenge Affordability
At the same time, building a new home is more expensive than ever. The average cost has jumped to $504,109 — a 52.6% increase since 2019. Labour shortages, rising material prices, and tighter environmental standards have pushed costs higher, making it even harder for developers and homebuyers to keep up.
Industry experts warn that unless Australia boosts construction productivity and workforce capacity, it may fall short of the national housing target — threatening to further deepen affordability issues.
What Comes Next?
While the February rate cut brought a quick burst of activity, economists call it a “sugar hit” — a short-lived boost that could fade if further rate cuts don’t follow. Many buyers and sellers are now in a holding pattern, awaiting the RBA’s next move.
Rodney McLoughlin says this moment in the market offers both opportunity and caution. For investors and upgraders, current conditions may present rare buying windows. But longer-term sustainability will depend on broader economic stability, housing supply, and government policy.
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. 16 May 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.
