CoreLogic Head of Research Australia, Eliza Owen, reveals that historical data suggests national dwelling values could rise by 6.1 per cent for each percentage point reduction in the cash rate, with premium markets showing particular sensitivity.
“Lower interest rates are set to boost the housing market in 2025,” Ms Owen said.
“Lower rates mean buyers can borrow more, spend more, and ultimately make housing a more attractive investment.”
Ms Owen said that markets will vary significantly based on location and property characteristics.
“Based on CoreLogic’s analysis, relatively expensive markets have historically shown stronger responses to reduced cash rate settings, especially in the house sector,” she said.
Ms Owen said that premium segments of Sydney and Melbourne markets, which have experienced significant value drops since May 2022, could lead the recovery.
“If history is anything to go by, certain markets will see a bigger boost from rate reductions than others, and it may be because of market characteristics like price point, location and investor interest,” Ms Owen said.
“A reduction in the cash rate could spur a recovery trend in the high end of the Sydney and Melbourne housing market, which tend to be the bellwether for broader market recoveries in those cities.”
In Sydney’s Leichhardt area, historical data shows that a one per cent reduction in interest rates correlates with a 19 per cent increase in house values.
Both cities’ unit markets that respond strongly to rate cuts typically feature high price points or significant investor ownership she said.
The research identifies Brisbane’s more expensive suburbs as those most reactive to interest rate reductions.
Most top-performing house markets in the region had median values exceeding $1 million, with Browns Plains being a notable exception.
Adelaide and Perth show a different pattern, with Ms Owen noting that “the relationship between the cash rate and home values is far less pronounced” in these cities.
“Perth’s property values have been more influenced by mining sector conditions, while Adelaide has experienced steady growth primarily driven by demographic shifts, particularly during the COVID period,” she said.
The anticipated rate cuts are expected to have broader economic implications, particularly for consumer sentiment.
“In the current economic climate, these rate cuts should go a long way in boosting consumer confidence, signalling an end to the recent battle against inflation,” she said.
