What interest rate cuts could mean for Australian sellers

After nearly a full year with interest rates on hold, it's widely expected that we could see cuts arriving within the next six months. 

But just how certain is that prediction, and what will it mean for Australian property values if buyers and homeowners alike are given some rate relief? 

Find out what the experts are saying is up ahead.

Forecasters say cuts are on their way

Between May 2022 and November 2023, the Reserve Bank of Australia ramped the cash rate up at a historic pace from its record-low level of 0.10 per cent all the way to 4.35 per cent. 

While the sudden jolt to fight runaway inflation caused Australian property markets to dip in 2022, prices proved resilient in 2023 and surged back towards all-time highs in spite of the high interest rate environment. 

Now, in 2024, we've seen stability with rates and steadily falling inflation that's led many forecasters to predict a rate cut is approaching.

Westpac Group chief economist Luci Ellis said the bank expects "the RBA will remain on hold this year and start lowering the cash rate from February," with NAB and ANZ predicting the same timing. 

CBA is the outlier of the Big Four, projecting the first rate cut to come in December of this year. 

Regardless of when the first cut arrives, all four banks see the cash rate declining slowly over the course of 2025, finding a low-point of between 3.10 per cent and 3.60 per cent — a long way off the near-zero levels that fuelled Australia's landmark property boom of 2021.

Lower interest rates could stoke buyer demand

With falling interest rates comes better access to credit and increased borrowing capacities for buyers. 

As SQM Research managing director Louis Christopher told REA, "There is a strong history of rate cuts stimulating housing demand."

While Mr Christopher personally doesn't see the cash rate falling by a full 1 per cent, "if it did there would be a definite rebound."

Finder's head of consumer research Graham Cooke also sees the potential for a resurgence in price growth if four rate cuts were on the cards. 

"While rate cuts might alleviate some financial pressure on current homeowners, they could also reignite demand in the housing market, potentially driving up property prices again," he said. 

Ray White's chief economist, Nerida Conisbee, looked at historical cases where rates had been cut after a period of stability and found that some cities in particular were better placed for an upswing. 

"Since January 2011, the city that has had the biggest jump following a rate cut has been Sydney, followed by Melbourne, then Canberra," she said. 

“All these cities are the most expensive in Australia, and therefore, it makes sense that they would be more sensitive to the cost of borrowing."

Being the country's highest-priced city by a significant margin, Sydney in particular could be in pole position for a positive turnaround.

Affordability remains a key concern around the country

While there are some clear upsides for property price growth when rates are being cut, interest rates aren't the only factor. 

Affordability is already stretched to the limit in Sydney and huge levels of growth in Perth, Brisbane and Adelaide this year mean the once-affordable cities have now risen to join the ranks of Melbourne and Canberra. 

With high prices already putting so much pressure on buyers, even a few rate cuts may not be enough to open the door to strong gains in 2025. 

CoreLogic's latest report summarised by saying "While lower interest rates will help to improve serviceability, mortgage rates or housing values would need to come down significantly, or incomes rise substantially, before affordability metrics return close to average levels."

Westpac's latest price forecasts for the country project relatively small levels of growth for every capital city in the coming year as a result of poor affordability.

Overseas migration is also expected to keep slowing from the peak levels seen earlier in 2024. More moderate population growth means less stress on housing supply, reducing some of the upward pressure on prices.

How should sellers navigate the upcoming market? 

The past few years have been filled with surprising twists and turns that have completely upended many forecasters' expectations. 

Earlier in 2024 there was talk of rate cuts coming sooner as inflation trended downwards. Then, back in July, a spike in inflation sparked concerns of another rate hike. Now the consensus has returned to cuts being on the horizon.

Ultimately, nobody knows for certain what's up ahead, and forecasts are only the best estimation of what could happen based on the most current data that's available. 

Instead of fixating on timing the market when the future is unknown, it's important for sellers to focus on the things they can control. Presentation, marketing and pricing strategy are all vital parts of the selling process that, when done right, can help lead to a successful outcome in any market. 

A top local agent who understands the surrounding market dynamics is also better placed to provide advice on how to move forward and trump the competition. 

Thinking of selling?

If you're looking to get in on the action either this year or in 2025, it's important to be as prepared as possible in order to cut through the competition and achieve a standout result. 

Step 1: Understanding how your market is performing

Every market is different, and understanding your local market is fundamental to making the right selling decisions. Our guide to tracking market trends and data will help you to get a clear picture of how your market is performing and how that impacts you as a seller. 

Step 2: Know what your property might be worth

Getting a free home value estimate is a great way to set a foundation for your selling expectations and begin planning the path forward.

Step 3: Get a no-obligation market appraisal from a top real estate agent

Understand what your property could sell for in the current market by speaking to the top-performing agents in your suburb. Comparing top agents in your area will help you find the perfect partner for your selling journey and move towards a successful result.

Step 4: Finally, get your property listing-ready

Taking a thorough approach to preparing your home for sale is another critical step. From cleaning, decluttering, painting and performing other cosmetic renovations to home staging, photography and marketing, getting your property to sale-ready condition is a must.