Login
ISCOVER
The rate easing cycle has so far led to a tempered response from the housing market, but buyer sentiment could shift swiftly, Westpac research has suggested.
Subdued price growth, soft turnover, and a measured reaction to interest rate cuts give 2025 the feel of a ‘transition year’ for the housing market, according to Westpac.
In the Westpac Housing Pulse June 2025, the major bank said there had been mixed conditions midway through the year, with markets appearing to be tracking a slow and shallow turn upwards.
However, Westpac said that market improvements were not guaranteed while highlighting the need for caution over the housing market’s interest rate sensitivity.
There is also evidence of substantial ‘pent-up’ or delayed activity in the market, according to Matthew Hassan, head of Australian macro-forecasting at Westpac.
‘Fairly limited’ boost from rate easing
The interest rate easing cycle has given the housing market a slight boost, Hassan said, although the reaction remains measured and the steady nature of rate drops combined with the high starting point for prices will see a fairly muted ‘affordability-constrained’ response.
“Australia’s housing markets have drifted somewhat over the last three months, with the impetus from lower interest rates still fairly limited and other uncertainties likely weighing at the margin,” Hassan said.
“While widely expected, the RBA’s May rate cut, and the more confident language that accompanied it should provide a little more traction in the months ahead.”
Despite a moderate response so far, Hassan said that with consumers bullish on prices, buyer sentiment could shift quickly.
Research last month found that lower interest rates could help cut mortgage arrears and reignite refinancing activity, while the February rate cut has fuelled an increase in housing values.
House price growth varies substantially
Westpac research showed the relative outperformance of lower-priced properties in several markets, implying that stretched affordability and limited supply are leading buyers to bid up prices at the lower end of the market.
House prices have broadly continued to rise, with Westpac saying that the major capital city measure tracked a 1.2 per cent gain over the last three months, albeit with some of that being seasonal.
However, annual price growth moderated to 2.7 per cent – a slight decline in real, inflation-adjusted terms – Westpac researchers said.
All major capital city markets have seen positive price growth over the last three months, ranging from 1.1 per cent in Sydney to 1.2 per cent in Melbourne, 1.3 per cent in Adelaide, and 1.6 per cent in Brisbane and Perth. Tight housing supply and stretched affordability remain prominent themes, Westpac said.
Commenting on house price changes, Hassan said: “There are some hints of a lift in some of the more cyclically-sensitive ‘top tier’ market segments after the RBA’s rate moves. But so far these gains have not been particularly strong or decisive.”
[Related: Rate cuts spark rise in housing values]
JOIN THE DISCUSSION