RBA Rate Cut to Boost Property Market

Sydney and Melbourne’s property markets are set for a boost following the Reserve Bank’s decision to cut interest rates by 0.25 percentage points to 4.1%.

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Pick & Scroll News
February 19, 2025

Sydney and Melbourne’s property markets are set for a boost following the Reserve Bank’s decision to cut interest rates by 0.25 percentage points to 4.1%. The move aims to improve borrowing conditions and strengthen investor confidence but might also drive further competition in a tight rental market.


Australia’s property sector has been navigating a downturn, with house prices struggling to gain traction nationwide. Melbourne, in particular, has seen weakened demand, compounded by new taxes on investors. However, the recent tightening of rental vacancy rates suggests that rental income could rise alongside lower financing costs, creating a more attractive environment for buyers.


Market analysts believe the rate cut will be felt most in Melbourne, where improved affordability could drive renewed interest from property investors. Without the cut, property prices were projected to decline by up to 4% in Sydney and 3% in Melbourne, but with borrowing conditions easing, researchers now expect nationwide house price growth of 6% to 10% this year. This includes a modest 2% rise in Melbourne and 3% in Sydney, though these increases may still struggle to match Australia’s 3.2% inflation rate.


Elsewhere, cities like Brisbane, Perth, and Adelaide could see stronger price growth, with forecasts predicting gains of up to 15% in some areas. Additionally, the property market had already shown signs of recovery, with national auction clearance rates approaching 70% in the weeks leading up to the rate decision.


One unexpected shift has been in the rental market, where vacancy rates tightened sharply in January, dropping from 1.6% in December to just 1%. This decline suggests rising competition for rental properties, further incentivising investors to re-enter the market. The rate cut is also expected to improve borrowing capacity for buyers, with estimates suggesting an average-income individual could now borrow an additional $12,000.