Here’s Why a Rate Cut Might Not Be Coming Anytime Soon – What It Means for the Property Market
Weekly Real Estate Market Update with Leigh Martinuzzi MPG
Australia’s property market continues to be a hot topic, with ongoing discussions around housing affordability, interest rate predictions, and shifting consumer sentiments. Let’s dive into the key insights from recent reports and some personal thoughts on where we might be heading.
Recent surveys have shed light on the current state of livability in Australia. While housing affordability is consistently ranked as one of the top factors contributing to livability, the reality is falling short. Australians are increasingly frustrated with the rising costs of owning or renting a home, with satisfaction levels around housing options remaining worryingly low. The dream of owning a home is becoming harder to attain, especially for younger generations. This comes as no surprise, given the significant gap between property prices and wage growth.
To put things into perspective, back in 1984, when Baby Boomers were entering the housing market, property prices in major cities were roughly three times the average annual full-time earnings. Fast forward to today, and house prices have grown three times faster than wages. The cost of private rentals has also surged, making it challenging for many Australians to find suitable housing.
I checked the latest figures, and the national median house price has now climbed to just over $800,000, while the average in our capital cities sits at slightly above $1 million. When you compare this to the current average annual earnings of around $100,000 per person, it’s clear why housing affordability is casting a shadow on overall livability satisfaction in Australia. The gap between income levels and property prices is becoming increasingly unsustainable, making it harder for many Australians to achieve their dream of homeownership and affecting the quality of life for many.
This pressure is exacerbated by Australia’s rapid population growth—one of the fastest in the OECD. The population is projected to reach around 35 million by 2046, adding about 330,000 people annually. With household sizes shrinking, demand for housing is only set to increase, putting even more strain on supply.
On the topic of interest rates, there’s been a lot of speculation about when the RBA might cut the cash rate. My personal take? I still believe we could see a rate cut either by December this year or early in 2025. The cost-of-living pressures are starting to bite, with many local businesses feeling the pinch. While retail spending remains relatively strong for now, there’s a risk that the Christmas period could be tough for some if financial pressures continue to mount. A rate cut could provide some much-needed relief, especially for mortgage holders who are juggling higher repayments alongside everyday expenses.
However, not everyone shares this optimistic outlook. In a recent conversation, economist Dr Andrew Wilson suggested that we might not see a rate cut until much later in 2025. According to Dr Wilson, while inflation is easing, the RBA is being cautious. They’re worried that any premature rate cut could reignite inflationary pressures, particularly if the economy doesn’t show clear signs of stabilisation. Dr Wilson believes that the RBA will likely wait until there’s solid evidence of sustained economic stability before making any cuts. The focus right now seems to be on maintaining a steady course to prevent any potential economic shocks.
In the meantime, construction activity is slowing, with new project approvals declining due to rising costs and supply chain challenges. Builders are finding it tough to keep projects viable, which is contributing to the housing shortage. This slowdown in construction could also impact employment, particularly in sectors that rely on new developments. While there’s talk of government intervention to ease the burden on developers, it remains to be seen whether any cost savings will be passed on to buyers.
As we move closer to the end of the year, it’s a market worth watching closely. Personally, I believe that even if we see a short-term boost in buyer demand due to a potential rate cut, the longer-term challenges of affordability and supply will continue to shape the market.
And watch this space over the next week—I’ll be writing a brief article about the pros and cons of selling over the Christmas period. You may be surprised by the findings. Make sure you follow me on socials for these updates and more; you can find all my links to YouTube, Facebook, and Instagram via my business card link here: https://blinq.me/BlwXbuDwhLhG?bs=db.
As always, I’m here to keep you informed so you can make the best decisions moving forward. At Martinuzzi Property Group, our mission is to help people live more fully, find more meaning, and experience more joy on their property journey. If you’d like to chat about your plans or need a free consultation, don’t hesitate to reach out. And don’t forget to check out my latest property e-magazine here.
