Rate cut signals a busy winter market ahead for buyers and sellers

A decision by the Reserve Bank of Australia to cut interest rates will bring much-needed relief to mortgage holders, strengthen buyer confidence and increase supply heading into the winter market, according to LJ Hooker.

Head of Research, Mathew Tiller, said while headline and underlying inflation are within the target range, the labour market is showing early signs of loosening, and household spending remains under pressure from the higher cost of living.

While the economy is still growing, momentum has slowed. The RBA has acted now to provide some forward support and prevent a sharper slowdown expected later in the year due to US tariffs on imports.

“After a long period of trying to get inflation under control, the RBA can be comfortable reducing the cash rate,” Mr Tiller said.

“This is good news for the property market, and we will see confidence return by increasing borrowing capacity, improving serviceability, and putting more cash in the pockets of everyone. We’ve seen in the past that lower borrowing costs also encourages hesitant vendors to list, especially when they sense buyers are becoming more active.”

It has been an unusual start for the property market this year due to the late Easter, Anzac Day long weekend and the federal election; however, activity has rebounded in May with a noticeable increase in appraisals and listings.

“Buyers are still out and about, which is reflected in auction clearance rates consistently holding above 60 per cent,” Mr Tiller said.

“The decision by the RBA to reduce rates won’t shoot the lights out in the market by any means, as there are still affordability pressures due to recent price growth. But we anticipate seeing demand pick up as confidence returns. With more cuts expected, buyers will be looking to get in before rates fall further and demand strengthens.”

The property market typically slows during the cooler months, with sales traditionally picking up in spring. Last winter, strong activity was recorded across several capital cities – especially Hobart, Brisbane and Adelaide – with moderate growth in Sydney, Melbourne and Perth.

Demand is currently concentrated on the more affordable segments of the market, however, some opportunistic purchasers are looking at the top end, where prices haven’t grown as fast, particularly in Melbourne and parts of Victoria.

“Wage growth has been solid, so we expect to see this demand continue in prestige suburbs where there has been some softening of price growth this year,” Mr Tiller said.

“It is important to remember that people look for property to buy at all times of the year, and there are benefits to selling in winter. One of these is that buyers tend to be more serious and committed, as they want to get ahead of any competition before spring.”