House prices across parts of Queensland could rise as much as $70,000 in a matter of months in some suburbs, if the four interest rate cuts predicted by the big banks eventuate.
Exclusive data from Ray White reveals the impact of rate cuts on house prices in 2011, 2015, 2016, and 2019, with the research showing an average rise in values of up to 1 per cent in 414 suburbs in the month immediately after each cut.
The analysis shows the suburbs with the largest average increase in house prices post a rate cut are on the Gold and Sunshine Coasts, with Palm Beach and Miami both recording typical gains of 1 per cent in a month.
This house at 86 Melaleuca Dr, Palm Beach, is on the market for $3.95m.
That means if interest rates were to be cut tomorrow, the median house price in Palm Beach could immediately rise by $17,546.
With financial markets pricing in four interest rate cuts in the next 12 months — starting as soon as December — that could mean a $70,184 rise in Palm Beach’s average house price.
Homeowners in Noosa Heads, where the median house price is $2.23m, could expect to pocket equity gains of about 0.8 per cent, or $18,716, in the month after each rate cut — that’s a whopping $74,864 after four cuts.
In Brisbane, the suburbs that recorded the strongest jumps in home prices after previous rate cuts are on the southside, with Camp Hill topping the list with forecast average growth of 0.6 per cent or $9,879, followed by Tarragindi, Holland Park, and Highgate Hill.
This house at 82 Chainey Ave, Miami, is on the market for offers over $2.85m.
Ray White chief economist Nerida Conisbee said the impact from the next rate cut could be even bigger than history dictated in some areas, and as little as a month away.
Ms Conisbee said that while Brisbane had historically had a more mild reaction to interest rate movements, it was more likely to record larger price jumps this time as home buyers were already highly confident.
Another key to the rate cut’s impact on home values would be in how the Reserve Bank announced it, she said.
“If most people are expecting four cuts next year, that will change sentiment to be far more positive,” Ms Conisbee said.
Ray White Group chief economist Nerida Conisbee. Picture: Supplied
But the big factors will still be the cost of living, the supply of new homes and population growth.
“Population is still moving and that is fundamentally the driver of prices,” Ms Conisbee said.
“Especially if you don’t build enough housing.”
The economist said she believed there would be a rate cut this year or by March at the latest, but that it would only be a 0.25 per cent improvement for mortgage holders.
While the firm’s analysis tracked what would happen in that situation, she said a 0.5 per cent cut could cause an even larger increase in home values.
“I don’t think it would double the benefit, but it could lead to a bigger increase,” Ms Conisbee said.
This house at 25 Durimbil St, Camp Hill, is for sale for offers over $1.29m.
Ms Conisbee said coastal lifestyle hubs along the Gold and Sunshine Coasts were the most likely to benefit from a rate cut, based on historic trends.
A rate cut could also help “stabilise” the rental market, as many landlords had raised rents to accommodate heightened interest payments for their investments.
“If that cost goes down, it won’t be so hard to pay a loan and you might not be so motivated to raise rents,” Ms Conisbee said.
But it’s not all good news for the property market.
“There’s always a risk to affordability when prices rise,” Ms Conisbee said.
“So for first-home buyers, a fast-moving market could be challenging. If someone wanting to buy a $700,000 home finds it has gone to $720,000, they will need a bigger deposit.”
This house at 169 Fingal St, Tarragindi, is on the market for offers over $1.39m.
It comes as NAB this week revised its cash rate cut forecast, bringing forward the timing of the first cut from May to February 2025 — in line with the forecasts of Westpac and ANZ.
CBA is the only major bank expecting the first RBA cut to come one meeting earlier in December 2024.
According to Canstar, a rate cut of 0.25 per cent would result in the monthly repayments for a $600,000 loan and 25 years remaining drop by $92.
Canstar data insights director Sally Tindall, said a rate cut in February was looking likely if core inflation continued to track in the right direction, or unemployment started to accelerate.
Financial markets are pricing in four interest rate cuts by the Reserve Bank Of Australia within the next year. Image: Brendan Esposito.
“All four big banks now believe the RBA will be ready to cut the cash rate in just over four months’ time, if not before, in the case of CBA,” Ms Tindall said.
“However, the outlook for both inflation and unemployment is still highly uncertain. A couple of wobbly sets of inflation data could see the RBA holding for longer, particularly if unemployment remains relatively steady.
“If the Reserve Bank of Australia doesn’t know exactly when cash rate cuts will eventuate, don’t go putting them into your own budget.
“The one thing borrowers can do ahead of time is get themselves on the lowest rate possible. That way when that first cut does land, it will actually be their second.”
Apollo Auctions Director Justin Nickerson said smart buyers were making their moves now before interest rate cuts eventuated.
“Southeast Queensland and Perth remain the strongest markets with auction clearances above 60 per cent over the past three months,” Mr Nickerson said.
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