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Recent estimates from CoreLogic have claimed that for every 1 percentage point drop in the cash rate, national dwelling values would rise by 6.1 per cent on average.
“Lower interest rates are set to boost the housing market in 2025. Lower rates mean buyers can borrow more, spend more, and ultimately make housing a more attractive investment,” CoreLogic said.
“In the current economic climate, these rate cuts should go a long way in boosting consumer confidence, signalling an end to the recent battle against inflation.”
“CoreLogic estimates based on previous periods of rate reductions that national dwelling values would increase an average of 6.1 per cent for each 1 percentage point decline in the cash rate – but Australia is not one housing market.
However, Australia’s property prices vary drastically depending on location, and so too could the potential increases sway, said the CoreLogic report.
“If history is anything to go by, certain markets will see a bigger boost from rate reductions than others, and it may be because of market characteristics like price point, location and investor interest.”
“Based on CoreLogic’s analysis, relatively expensive markets have historically shown stronger responses to reduced cash rate settings, especially in the house sector.”
Some areas are likely to see drastic changes. In Sydney, for example, suburbs like Leichardt, Sutherland and Warringah are expected to see house values climb 19.1 per cent, 19 per cent and 18.1 per cent, respectively, if a 1 percentage point cash rate decrease were to occur.
In Melbourne, house prices would see similar changes. Whitehorse West, Essendon and Manningham West would climb by 18.4 per cent, 18 per cent and 17.4 per cent, respectively.
Meanwhile, Brisbane’s Sunnybank, Nathan and Brisbane Inner North would see more modest rises of 5.2 per cent, 5.1 per cent and 4.9 per cent.
Clearly the big cities are in store for some substantial increases in house prices if the Reserve Bank follows through with multiple rate cuts.
“Overall, the markets that stand to gain the most from a cash rate cut could be those that have demonstrated more sensitivity to changes in financial and interest rate settings in the past. These are typically the higher-end markets of Sydney and Melbourne, many of which have also seen a substantial reduction in home values amid rate rises,” CoreLogic said.
“A reduction in the cash rate could spur a recovery trend in the high end of the Sydney and Melbourne housing market, which tend to be the bellwether for broader market recoveries in those cities.”
