Australian home prices have risen sharply since RBA governor Michele Bullock announced three interest rate cuts over 2025.
Australian home prices have blasted higher again, with the typical home now worth nearly $65,000 more than a year ago.
New PropTrack data has laid bare the staggering impact of three rounds of interest rate cuts this year and a surge in demand from first-home buyers, with national prices jumping 0.6 per cent in October to cap off a 7.5 per cent price surge over the past year.
Darwin and Brisbane led the pace when it came to annual price rises, with both cities seeing an average rise in dwelling prices of just under 13 per cent. Adelaide and Perth rises were 10.3 per cent and 11.8 per cent, respectively.
Sydney prices rose 6.4 per cent for the year, while Melbourne (4.2 per cent) and Canberra (2.7 per cent) had the slowest rises, according to the PropTrack Home Price Index.
PropTrack noted national growth was “higher” than the long-term average for annual dwelling price rises and meant home seekers were paying prices that would have been unthinkable a year ago.
Median house prices are now over $1m in three capitals – Sydney, Brisbane and Melbourne – while Canberra is on the brink of joining the same club with a median house price of $996,000.
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Buyer competition at auctions has been heating up. Picture: Max Mason-Hubers
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Perth is also approaching the million dollar milestone: the median house price hit $979,000 at the end of October, PropTrack revealed.
Sydney remains the most expensive capital by some measure. The median house price in the Harbour City crossed $1.6m for the first time at the end of October to reach $1.62m.
The latest growth spurt means many of the fears voiced earlier this year are coming true: that the Reserve Bank’s rate cuts, designed to ease cost of living and mortgage pain, have instead supercharged buyer demand and fanned another surge in home values.
REA Group economist Eleanor Creagh said the impact of this year’s three cuts has extended well beyond improvements to buyer’s borrowing power.
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Ms Creagh noted that cheaper interest had improved market sentiment and encouraged buyers who had been sitting on the sidelines last year to get back into the market.
Rate cuts had also instilled a fear among home seekers of further prices rises and this had spurred many to make larger offers on homes to secure them quicker – before prices rose too quickly.
“Buyers expect prices to lift because of rate cuts so they are pulling forward their decisions and that’s contributing greatly to demand,” Ms Creagh said.
She added that the number of homes hitting the market this spring hasn’t kept pace with the increases in demand.
Listings have edged up, but not by nearly enough to match the flood of new buyers and this has helped tighten competition, Ms Creagh said.
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Many of the buyers making offers on properties over the past months were reported to be first-home buyers spurred by the government’s expanded First Home Guarantee scheme.
The program allows first-time buyers to purchase homes with deposits of 2-5 per cent without needing to pay pricey lender’s mortgage insurance.
Two Red Shoes mortgage broker Rebecca Jarret-Dalton said the scheme was pushing up demand across the market – not just from first-home buyers.
“Even those not participating can see that the policy without anything to increase supply is going to drive house prices up,” she said. “All of the language from non-first home buyers is around avoiding the price rises.”
Ms Jarret-Dalton said the scheme needed urgent review.
“There’s an air of the 2007 US market crash about this scheme,” she said. “Access now may mean entrapment long-term. Higher mortgage repayments, greater interest, and what if property value falls? This needs to be regulated to the hilt,” she said.
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Rebecca Jarret-Dalton said there was an “air” of the 2007 US market crash about the First Home Guarantee scheme. Picture: Dylan Robinson
Ms Creagh said a rise in first-home buyer spending has been matched by greater spending from other buyers, particularly investors.
“Population growth has been another factor,” she said. “Our population growth rate has been slowing but it is still historically high and new housing supply remains challenged.”
Ms Creagh said recent higher inflation figures, which have suggested another cut in interest rates may not eventuate this year or early next, won’t dent property demand.
“It’s likely the market will continue to be strong even if the RBA announces no more rate cuts because there was a perception we had already been close to the end of the (cutting cycle).”
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