The recent interest rate cut by the Reserve Bank of Australia (RBA) has already begun to influence the property market, with February 2025 marking a notable upturn in home values. CoreLogic’s Home Value Index reported a 0.3% national increase, effectively ending a brief three-month downturn where prices had eased by 0.4%. This immediate response suggests that reduced borrowing costs are enhancing buyer confidence and the demand.
Melbourne
In Melbourne, this trend is particularly ev ident. The city experienced the fastest home price growth among Australian capitals in February 2025, with median house prices rising by $5,500 (0.68%) to $892,000, and median unit prices increasing by $4,000 (0.63%) to $576,000. This resurgence is attributed to the RBA’s rate cut, which has increased buyers’ purchasing power, leading to competitive auctions and heightened interest, including from interstate buyers.
Sydney
Sydney’s property market has also reacted positively. The city recorded a 0.5% increase in property prices in February, the largest rise in ten months. Economists note that Sydney’s market is particularly sensitive to interest rate changes due to the high debt levels required to enter the market, predicting stronger price growth throughout the year.
Rate cuts to drive further growth in 2025
Looking ahead, experts anticipate that continued interest rate cuts could further stimulate the property market. Domain Group forecasts national house prices to increase between 4% and 6% in 2025, with units set to grow by 3% to 5%. They suggest that while growth may be slow in the first half of the year, interest rate cuts by the RBA and the fear of missing out (FOMO) are expected to drive activity in the second half.
However, it’s important to consider that while lower interest rates can enhance affordability and stimulate demand, they may also lead to increased property prices, potentially offsetting the benefits for first-time buyers. Additionally, other factors such as wage growth, inflation, and housing supply constraints will continue to play crucial roles in shaping the property market’s trajectory.
In conclusion, the recent interest rate cut has already sparked a positive response in the property market, and further reductions could potentially lead to a more pronounced property boom in 2025. Prospective buyers and investors should stay informed and consider both the opportunities and challenges presented by these market dynamics.
Ready to kickstart your property journey? Whether you’re a first-time home buyer or looking to invest, get in contact with a UFinancial team member today for expert advice and support with your home loan and mortgage needs.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent. Content developed in partnership with IFPA.
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