As the Reserve Bank of Australia (RBA) is currently meeting to discuss monetary policy, expectations for an immediate interest rate cut remain low.
Speculation throughout 2024 suggested potential rate reductions, but the consensus has now shifted, with many economists predicting no cuts until 2025 at the earliest. The Big Four banks anticipate rate drops starting in February 2025, forecasting cash rates between 3.10% and 3.60%.
This current phase of stability, which has lasted almost 12 months, marks the third-longest duration of a peak cash rate in RBA history. John Bongiorno, Sales Director at Marshall White Group, noted that buyers and sellers in Victoria have adapted to the current financial landscape.
“Everyone’s buying. Rates have been stable for some time now, and most people expect them to remain that way or possibly come down. No one is forecasting an increase,” Mr Bongiorno said.
Thomas McGlynn, CEO of BresicWhitney in Sydney, highlighted that while interest rate hikes have shaped buyer and seller behaviour, the full impact has been slower to materialise than expected.
“Interest rates have played a part in shaping the property market, both for buyers and sellers. However, it didn’t have as quick an impact as many predicted, and we’re only starting to see the effects combined with cost of living and inflation,” he said.
Mr McGlynn said that the Harbour city is now seeing price adjustments for the first time in years. “This quarter, we will likely see reported price drops across Sydney,” he added, indicating that the market is shifting from a seller’s to a more balanced or even buyer-favourable environment.
Reflecting on buyer sentiment, Mr McGlynn observed that many buyers are keen to act before the market rebounds.
“The only way you know when the market’s at its bottom is when it’s already on the way back up.”
This aligns with Mr Bongiorno’s belief that attempting to time the market is unwise: “When you see something you like and can afford, buy it. Real estate should always be a long-term commitment.”
Mr McGlynn also said buyer behaviour has also stabilised as people grow accustomed to current conditions.
“There was a big gap between what buyers felt properties were worth and what sellers expected, but that gap has narrowed. Buyers are recognising that it’s good buying at the moment, and if they wait for interest rates to come down, the market might already be on its way back up.”
He also said that despite recent auction clearance rate dips, properties are still attracting active bidders. “Many of the properties passing in at auction aren’t doing so without any interest; it’s often a matter of price expectations.”
Education is key for both buyers and sellers, according to Mr McGlynn, who added, “Understanding market realities helps people make better decisions.”
While the market is buoyant, the demand for turnkey properties continues to grow as construction costs and bureaucratic hurdles deter renovation projects.
“The cost of building has blown out incredibly in recent years, and people are wary of the time and bureaucracy involved in renovations. Turnkey properties are more popular than ever, across all price ranges,” said Mr Bongiorno.
Looking ahead, Mr McGlynn anticipates a gradual market rebound. “I think we’re at the bottom end of this cycle and the top end of the interest rate cycle. The next move by the RBA will likely be down, and even a slight reduction will create positive sentiment among buyers,” he said.
This sentiment was echoed by Mr Bongiorno, who envisions a stable market through 2025 with potential growth following any rate reductions.
