RBA Holds Rates Steady: What Does This Mean for the Property Market and Buyers?
Real Estate Market Update with Leigh Martinuzzi MPG
In property news this week, the Reserve Bank of Australia (RBA) has once again kept the cash rate on hold at 4.35%, which comes as welcome news for many. Inflation has remained above target for 11 consecutive quarters, but there has been little change over the past year. Underlying inflation was recorded at 3.9% at the end of June, and while the headline inflation rate, as measured by the Consumer Price Index (CPI), declined slightly in July, the RBA’s 2-3% target is unlikely to be reached until sometime in 2026. This timing aligns with the 18-year property cycle I’ve discussed before, with many experts predicting a market downturn around 2026. We’re likely to see property price growth continue at a steadier pace over the next couple of years before external economic pressures and slowing spending start to have a greater impact.
For those looking to purchase, this news should offer some reassurance. With inflation stabilising, there’s a growing sense that future interest rate rises may be less likely. While there’s speculation about a potential cash rate cut in December, only one of the big four banks is predicting this will happen, with most others forecasting cuts in early 2025. Still, this gives buyers confidence in their borrowing capacity and financial stability moving forward. However, it’s worth noting that when interest rates are cut, housing demand often increases, leading to rising house prices. My advice to potential buyers is to act now. Buying before a rate cut, when demand and competition are lower, can help avoid the price hikes that typically follow. Locking in a lower price now could mean benefiting from reduced mortgage repayments later.
Banks are also adjusting their lending policies to help customers access credit. For those with existing mortgages, a rate cut will be welcome relief, especially as many homeowners are currently spending more than half their income on mortgage repayments. This leaves little room for day-to-day living expenses, highlighting the immense pressure on household budgets.
Interestingly, recent improvements in consumer confidence are also worth noting. The ANZ Roy Morgan index rose 0.8 points to 84.9 this week, marking its 86th week below the benchmark of 85 points. However, this small increase signals that consumer sentiment is improving as we move into the final quarter of the year. Spring market activity is expected to be strong, with more sellers entering the market and continued demand from buyers. However, while buyer demand remains, I don’t believe we’ll see prices rise at the same exponential rates we’ve witnessed over the past few years.
Property prices across the Sunshine Coast have risen over 40% since the start of the COVID-19 pandemic, with year-on-year growth in hinterland suburbs ranging from 10% to 15%. It’s hard to see prices climbing much further, largely due to affordability concerns. According to a report by MacroBusiness, only 14% of homes sold in the 2023-24 financial year were affordable for households earning a median income of $112,000 per year. Mortgage costs are as high as they were in 2008, with the average household now needing to spend a third of its income on a median-priced home.
Buyers are still willing to pay current asking prices, but the question remains—how much further can they be stretched? I believe we’ll see a modest price increase, but a further 10-15% rise over the next year seems unlikely. Instead, a 6-8% increase in most areas of the Sunshine Coast feels more realistic.
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