Australia’s property market is facing a perfect storm this spring.
The combination of falling interest rates, an increase in listings as vendors list their properties for sale and government subsidies are rewriting the rules for buyers and sellers, and it’s creating opportunities worth noting.
Spring in bloom
Spring is selling season in Australia, with the warmer weather prompting many vendors to list their property for sale. More property listings hitting the market means more choice for buyers.
REA Group senior economist Eleanor Creagh says the housing market’s momentum is the perfect time for sellers.
“The spring selling season is shaping up to be a big one," she says. "Lower interest rates have already boosted the borrowing capacity and reigniting buyer confidence, particularly for first-home buyers and first-time investors.
“Spring is traditionally the busiest time of year for real estate, and with the market gaining momentum, we’re anticipating a wave of new listings and heightened buyer activity."
Unlocked borrowing power
The Reserve Bank delivered its third interest rate cut for the year in August, taking the cash rate to 3.6% for the first time since April 2023. While it could be the last rate cut for this cycle, it’s good news for the market.
Lower interest rates have already boosted the borrowing capacity and reigniting buyer confidence, particularly for first-home buyers and first-time investors.
Rethink Group chief executive Scott O’Neill adds: “Falling rates is creating opportunities, but also fierce competition and buyers who move early are in the strongest position to benefit before the market heats up further.”
Expanded Home Guarantee Scheme
The expansion of the Home Guarantee Scheme now allows people with just a 5% to get a loan backed by the government, which will bring new buyers into the market for the first time.
The extended scheme removed limits to the number of government guarantees available at the start of the month, giving all Australian first home buyers the chance to enter the market with both the low deposit and without the need for Lenders' Mortgage Insurance.
The expansion of the Home Guarantee Scheme has opened up huge swathes of the market to buyers who were previously priced out. Picture: Getty
The scheme also removes income caps and provides simpler access to the scheme for regional areas.
Investors and migrants compete for property pool
Wannabe property investors biding their time waiting for the right opportunity to jump are also likely to feel buoyed by the lower interest rates the spring, and are more likely to make their move.
Australia also added more than one million new migrants into the population late last year, which exceeds historical averages. This raised concerns about pressures on the already tight housing market as we experience the first spring property surge since this influx, O’Neill says.
While the government imposed a two-year ban on foreign purchases of established homes earlier this year, there are exceptions for new homes and investments that could significantly increase housing supply.
Constructing a new home is still an option for temporary residents and foreign investors. Picture: Getty
“Until we start seeing huge swathes of units and houses being constructed, there’s just nowhere near enough properties in the market to house our population,” O’Neill argues.
“Investors and migrants are all fighting over the same pool of available housing listings, which is becoming a big problem.
"We’re not keeping up with the new supply coming into the market, which is why there are long lines of people trying to look at basic rental properties all over the country.”
Homeowners trading up
Cheaper finance is also motivating existing owners to up upsize, creating fresh turnover in tightly held suburbs.
On the flip side, traditional downsizers are increasingly remaining in larger homes across the country, narrowing the options for growing families.
While the government has been attempting to incentivise Baby Boomers to put their properties on the market, options like the spare bedroom tax and stamp duty scraps have had mixed receptions.
“Many buyers are now aiming higher thanks to lower repayments, but cost of living pressures are still tempering some decisions," O'Neill says.
Australians generally buy at least three properties in their lifetime, he anticipates.
“The first property could be a unit, then a family home before they start downsizing down the track," he explains.
"People with larger family homes may finally make their move and list their property for sale this spring given that finance is cheaper."
Falling birth rate
Australians have also been shelving baby plans at a rate of knots due to the rising cost of getting into the property market, which extends to the competitive rental market.
A declining birth rate presents a genuine threat to long-term economic growth, but with property prices jumping by up to $66,000 in just a year in some parts of the country, many people are losing the chance to set themselves up sufficiently for having children.
Research from KPMG shows Australia’s birth rate remains well below its pre-pandemic rate, despite a slight bounce-back in the past year. Figures show there were 292,500 births in 2024, a 2.6% uptake on 2023 numbers, but far below the 304,0009 births in 2019.
It’s hard to tell what impact this could have on the housing market.
With the nation still in need of higher births for economic reasons, current migration assumptions are making it tough to map out how property prices could be impacted by where people choose to have families.
The small baby bounce back Australia experienced last year was largely outside of capital cities, which while cheaper, are often less of an option for younger buyers in jobs that require in-office presence in the capitals.
As this year's spring selling season moves us towards the end of the year, the strong forces at play in today's competitive market have set a compellingly different market to what buyers are seen previously.
This article first appeared on Mortgage Choice and has been republished with permission.
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