The Australian real estate market is set for a significant shift in 2025, with major banks now forecasting earlier-than-expected interest rate cuts. According to NAB’s chief economist Alan Oster, the Reserve Bank of Australia (RBA) is likely to implement a 25-basis-point rate cut in February, providing relief for homeowners struggling with high mortgage repayments. This adjustment could ease financial pressure on borrowers and potentially stimulate further demand in the housing market.
Interest Rate Cuts and Their Impact
The anticipated rate cut is expected to bring down the cash rate gradually to 3.1% by February 2026. For homeowners with a $600,000 mortgage, this translates to an immediate savings of approximately $92 per month if banks pass the cut on in full. With inflation moderating faster than expected, this move marks a pivotal moment for both property owners and investors looking to enter the market.
Sally Tindall, Director of Data Insights at Canstar, advises homeowners to negotiate with their lenders now rather than wait for the official rate cut announcement. Even if the RBA holds off temporarily, taking proactive steps to secure a better rate could offer immediate savings.
The Growing Divide Between House and Unit Prices
One of the most striking trends in the market is the widening gap between house and unit prices. By the end of 2024, Sydney’s median house price stood at $1,470,625—nearly 71% higher than the median unit price of $859,963. This disparity has more than quintupled over the past two decades, making homeownership increasingly challenging for first-time buyers and upsizers alike.
Rodney McLoughlin, a seasoned buyers’ agent, has observed a growing number of buyers either moving further from city centers or turning to interstate markets like Brisbane, Perth, and Adelaide to build their property portfolios. “With affordability stretched in Sydney, many buyers are looking for creative solutions—whether that means renting in their preferred location while investing elsewhere or reconsidering unit options,” McLoughlin notes.
What This Means for Buyers and Investors
For first-home buyers, the current climate presents both challenges and opportunities. With house prices soaring, many are reconsidering units, despite concerns over strata costs and management. Others are choosing to delay homeownership in Sydney altogether, opting instead to build equity in more affordable markets.
Investors, on the other hand, may find value in units if demand increases due to affordability constraints. As the population ages, downsizers could help narrow the price gap between houses and apartments in key locations.
Looking Ahead
With interest rate cuts on the horizon and affordability remaining a significant hurdle, strategic planning is essential. Whether you’re a first-home buyer, an investor, or an up-sizer, staying informed and working with an experienced professional like Rodney McLoughlin can help navigate these shifts effectively.
If you’re considering your next property move, now is the time to explore your options, review your financing, and position yourself ahead of the market changes.
Real Estate Newsletter
This article is a curated summary of various news stories from the past week, offering insights and updates on the real estate market. 31 January 2025
