Australia’s housing market is showing renewed signs of life, as falling interest rates begin to shift buyer sentiment and nudge prices higher. Yet, while confidence is rebounding and listings are climbing, economists caution that deep-rooted affordability and supply issues remain unresolved.
National Australia Bank’s executive for home lending, Denton Pugh, believes the sector has entered a new phase. “Australia has reached a turning point,” he told news.com.au, noting that February’s 25 basis point cut by the Reserve Bank of Australia (RBA) had already begun to lift demand. More cuts are expected, with NAB predicting the next move at the RBA’s May 20 meeting.
Housing values rose 0.4 per cent nationally in March, with Darwin and Adelaide recording the strongest gains. Brisbane and Melbourne also posted modest increases, extending what NAB sees as the early stages of a more sustained recovery.
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Lending activity at NAB has picked up in recent weeks, driven largely by first-home buyers and upgraders. “We’re seeing clear evidence of improved confidence,” Pugh said. “This isn’t a boom, but the tone has changed. Buyers are more active and sellers are adjusting their expectations.”
The rebound in buyer activity is being met with an uptick in new listings. According to REA Group’s latest figures, March saw a 6.1 per cent year-on-year rise in new property listings nationally, with Adelaide, Sydney and Perth leading the capitals. Even as the market adjusts to a changing interest rate environment, more homeowners appear willing to test the waters.
REA Group’s executive manager of economics, Angus Moore, said the combination of cheaper borrowing and rising prices was boosting vendor confidence. “Nearly all capital cities recorded more new listings this year than last,” he said.
Regional markets were less buoyant, however, with some areas still feeling the effects of weather events and weaker population growth.
The looming federal election in May and a cluster of public holidays have temporarily disrupted listings volumes. Activity is expected to resume in earnest from early May.
While early 2025 is shaping up as a stable and relatively active period for housing, structural challenges remain. NAB’s Pugh emphasised that while sentiment has improved, affordability continues to weigh on younger buyers, and housing supply remains tight in key metropolitan markets.
The latest PropTrack data shows property values increased 0.3 per cent in March, with Sydney and Canberra recording the largest capital city gains. Strong population growth and a persistent housing shortage are expected to underpin further price growth in the coming months, though most analysts expect it to be moderate.
Eleanor Creagh, senior economist at REA Group, said improved borrowing power and buyer confidence would continue to support prices, but growth would remain measured. “We expect prices to keep lifting over the coming months, but the rate of growth is likely to be more modest compared to recent years,” she said.
At the same time, debate is intensifying over proposed changes to the federal government’s First Home Guarantee Scheme. If returned to office, the Albanese government plans to expand the scheme by scrapping income and property price caps, allowing more first-home buyers to enter the market with deposits as low as five per cent.
Industry reactions have been mixed. While mortgage brokers have largely welcomed the changes, warning they could ease deposit hurdles for younger buyers, others have sounded the alarm over unintended consequences.
Helia chief executive Pauline Blight-Johnston warned the expanded scheme could erode the role of lenders mortgage insurance (LMI) and pose “a risk to lenders.” SQM Research’s Louis Christopher said the policy could drive up prices by as much as 15 per cent without addressing the underlying supply problem.
Meanwhile, the Insurance Council of Australia has expressed concern that a broad-based expansion of the scheme could amplify systemic risk and expose taxpayers to large losses in the event of a downturn.
Looking forward, economists at all four major banks expect at least one further rate cut in May, with more likely to follow in the second half of the year. NAB is forecasting cuts in July, August and November, with another early in 2026.
For now, the market appears to be balancing on a knife’s edge—buoyed by lower rates and improved sentiment, but restrained by affordability challenges and macroeconomic uncertainty.
As Pugh put it: “There’s a level of stability we haven’t seen in some time. But with an election approaching and global headwinds in play, buyers and sellers alike will be keeping a close eye on the data—and the headlines.”
