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Australian Housing Market Rebounds as Rate Cut Boosts Sentiment, CoreLogic Data Shows

Theodore QuinnSunday, Mar 2, 2025 8:17 am ET
2min read

The Australian housing market appears to have turned a corner, with corelogic data indicating a rebound in prices following the Reserve Bank of Australia's (RBA) interest rate cut. The RBA reduced the cash rate by 25 basis points in February, marking the first cut since June 2022, and the move has had an immediate impact on the housing market.



The CoreLogic Home Value Index (HVI) posted a 0.3% national rise in February, ending a shallow three-month downturn where prices eased just 0.4%. This modest increase signals a major turnaround from the downward trend that was taking hold, particularly at the top end of the market. Eliza Owen, CoreLogic's head of research, likened the rate cut's effect to a pilot pulling a plane out of a tailspin, staving off a potential decline and crunch in response to affordability constraints.

The turnaround in property markets took hold early last month, ahead of the February 18 rate decision, as lower inflation figures made an RBA move look increasingly certain. This suggests that some of the movement in the market is due to expectations of a rate decline, as well as the boost to sentiment that the rate cut signifies, including a marker that we're getting over the inflationary hump.

However, the rate cut's impact on affordability is mixed. On one hand, lower interest rates make borrowing cheaper, increasing affordability for buyers. A 0.25% interest rate cut can increase the borrowing capacity of a median-income household by around 2.5% (Source: CoreLogic). This can make it easier for first-time buyers to enter the market and for investors to expand their portfolios.

On the other hand, lower interest rates also tend to increase property prices, which can offset the affordability gains for buyers. According to Ray White chief economist Nerida Conisbee, an early interest rate cut could bring back some confidence to the market, particularly in cities like Sydney and Melbourne where activity has slowed. She expects price growth of about 0-3% from a potential rate cut (Source: Ray White). This means that while buyers may have more borrowing power, they might also face higher property prices, making it more challenging to enter the market.

For investors, lower interest rates improve their cash flow, meaning that properties move from neutral or negative geared to positive (Source: DPN Director David Khalil). This can make investing more attractive, but it also depends on the rental yields, which may not keep pace with property price increases.

In conclusion, the recent interest rate cut has had an immediate impact on the Australian housing market, with prices rebounding following the RBA's decision. While the cut has a mixed impact on affordability, with cheaper borrowing offset by potential property price increases, the overall effect on affordability depends on various factors, including the extent of price growth and changes in rental yields. As the market continues to evolve, it will be crucial to monitor these trends and assess the long-term implications of the rate cut on both buyers and investors.
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BunchProfessional680
03/02
As a holder of $AAPL and some Aussie REITs, I'm watching rental yields closely. Diversification's key.
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Urselff
03/02
@BunchProfessional680 How long you been holding Aussie REITs? Any faves?
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West-Bodybuilder-867
03/02
Lower rates boost borrowing power, but higher prices might cancel the gains for buyers. It's a delicate balance.
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Anonym0us_amongus
03/02
Sydney and Melbourne might see price growth, but will it be enough to lure back hesitant buyers?
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EightBitMemory
03/02
@Anonym0us_amongus Not sure, bro.
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grailly
03/02
Rate cut's a double-edged sword, folks. 🤔
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WatchDog2001
03/02
@grailly True, rate cuts have mixed effects.
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bmrhampton
03/02
Rate cut's like a shot of adrenaline for the market, but long-term, it's all about rental yields and price control.
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JoinMySpaceship
03/02
@bmrhampton Adrenaline high, but watch price bubbles.
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Fauster
03/02
@bmrhampton Rate cuts boost short-term, but yields rule long-term.
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JRshoe1997
03/02
RBA's move might pull the market out of a tailspin, but watch for the landing—crash or cruise? 🤔
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Anteater_Able
03/02
Geared investors might see better days ahead, but don't bet the farm on rising rental yields.
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CarterUdy02
03/02
@Anteater_Able Rising yields? Not a sure bet.
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durustakta
03/02
My strategy: wait for price volatility.
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Regime_Change
03/02
@durustakta How long you planning to hold?
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MysteryMan526
03/02
RBA's move got me bullish on $AUD.
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TeslaCoin1000000
03/02
Buying the dip or riding the wave?
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Debbie
03/02

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Gurkaz_
03/02
@Debbie Good.
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Zurkarak
03/02
Inflation figures influenced the RBA's hand, but will the market's sentiment stay upbeat if inflation ticks up?
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alecjperkins213
03/02
RBA's rate cut did the job, but watch out for price growth eating up affordability gains. Market's a balancing act right now.
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KookyPossibleTheme
03/02
The market's rebound is promising, but don't forget—affordability's a long-term puzzle with many pieces.
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WorkingCareful7935
03/02
Rate cut's like a shot of espresso for the market—gives a quick buzz, but will the high last?
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Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.
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