Thousands of Aussies are sitting on the fence waiting for the RBA to move on interest rates before looking to buy property.
A massive swing is underway predicting an interest-rate cut within weeks but some of those with the most to gain say there’s ‘no chance’’ and are prepping for a rollercoaster ride in 2025.
Members of Australia’s largest property group, the robust 78,600-strong AUS Property Investors, are among the most sceptical that Australia’s cash rate target will be dropped in February – despite the ASX rate tracker now showing a 78 per cent shot at the next move being a fall to 4.1pc.
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RBA governor Michele Bullock is set to hold her first 2025 board meeting on February 17 to 18. Picture: NewsWire / Jeremy Piper
Group administrator, buyers agent and director of Property Principles Buyers Agency, Joe Tucker, said the Reserve Bank was not expected to cut interest rates in the same manner in which they increased them – where they delivered a shock 13 rises, many of which were consecutive.
“I don’t see them dropping in February,” he said. “I believe they will drop before the election in May but it will be cautious. It’s not going to drop like it increased.”
When asked for views over whether a February rate cut was on the table with core inflation dropping, the consensus among investors was a resounding no with the flavour of thinking circulating around: “definitely won’t be happening”, “I think they will wait a bit longer”, “ … and then you wake up from your dream”, “no chance mate”, “I wish, but unlikely” and “you believe in fairy tales too?”.
Scroll down for 5 tips to tackle 2025
Buyers agent & director of Property Principles Buyers Agency, Joe Tucker.
Mr Tucker said “the drops are going to be slow and gradual over the next couple of years”.
“Rather than a bomb down to the bottom RBA is going to be incredibly steady and careful. It’s hard to put the genie back in the bottle,” he said, “so the RBA is going to be cautious about dropping rates.”
But, he said, there was definitely going to be a rate cut before the federal election deadline in May.
“The RBA can’t factor an election as their reason to not drop rates. That should not play into it and nor should the frenzy that will happen to the property market when they do cut.”
Mr Tucker said most investors were not concerned about the rate cuts so much as the impact they would have on the market.
“For me it doesn’t really matter if they drop 0.25pc. It’s going to be gradual. We’re talking big money for everyone but it’s not my focus. However when rates do drop, that’s going to send a big wave of sentiment to buy. There are a lot of people out there sitting on the fence even in our group.”
There is major concern that an RBA rate cut could spark another property price boom given the tight housing supply situation across the country.
“Supply and demand in Australian property is ridiculous. The demand that will happen when rates drop is perhaps what RBA can’t say, the ripple effect of a drop – they don’t want to send all these people crazy. If you are sitting on the fence get in before all these things happen.”
Property investor and adviser Pete Wargent of AllenWargent Property Buyers said the sudden change in sentiment was already underway after inflation data mid week showed it was no longer a big hurdle, notching 2.4 per cent for the year to November – with trimmed mean inflation declining from 3.5 per cent to 3.2 per cent since the preceding month.
“Headline inflation for the fourth quarter looks set to be very soft, in part due to government subsidies, while the trimmed mean inflation result looks to be on track for a quarterly figure of about 0.6 per cent or thereabouts,” he said.
Pete Wargent of AllenWargent Property Buyers said markets were pricing in a February rate cut due to expectations that core inflation will have eased for two quarters.
“If that occurs, the two-quarter annualised rate for core inflation will be below 3 per cent, and as such with inflation no longer a barrier to easing, markets are pricing an interest-rate cut next month as a 75 per cent likely.”
“Macquarie moved its call to a cut in February, with 75 basis points of easing priced in for 2025, though the labour force figures continue to show robust results (as they did Wednesday!).”
Mr Wargent said “in short, inflation is not a barrier to a rate cut now. However the jobs market has remained surprisingly tight, so it’s quite possible that the Reserve Bank will hold off making a move until more data comes to light”.
April seems to be the current thinking among investors for a rate cut off the current trajectory of economic data, given the RBA has condensed its board meetings down to eight in 2025 – with just two meetings between February to April: February 18 and April 1.
The Australian federal election is due to be held by May 2025.
5 TIPS TO TACKLE 2025:
Aus Property Investors administrator Joe Tucker has shared below five tips to tackle the propety market given the coming frenzy and interest rate drop before May 2025.
1. Get your finances in order
“Now’s the time to sort your cash and lending situation. Have a chat with your broker about what you can borrow. Run the numbers and make sure they work for you, even if rates go down, have a buffer as if they are 1-2 per cent higher. This isn’t a short-term fling, it’s a 30-year commitment. Build a solid budget based on today’s rates, anything lower later is just icing on the cake.”
2. Assess your markets early
“You don’t want to scramble when the time comes. Start exploring areas that fit your budget and goals now. Build those relationships with agents, so when the right property pops up, you’re already in the game.”
3. You can negotiate far better today
“The market right now is still very tight, but you’re more likely to get a discount in this market than in six months’ time, so if you’re ready to go now, you may be able to negotiate stronger to get a better result.”
4. Prepare for the competition
“If you spot a property that ticks all your boxes, don’t wait for rates to drop. Competition will be fierce once they do, so snapping up a good deal now might save you a bidding war later.”
5. Keep the bigger picture in mind
“Remember, property investing is about long-term growth. Don’t get caught up in the hype of a rate drop, create your plan and stick to it. Whether it’s for rental yield, capital growth, or a mix of both, your strategy should guide every move.”
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