Australia’s property market has shown renewed momentum following the Reserve Bank’s first interest-rate cut in four years, announced in February.
The RBA reduced the official cash rate by 25 basis points from 4.35% to 4.10%, citing easing inflation, subdued private demand, and moderating wage pressures. While the bank signalled a cautious approach going forward, the move lifted buyer sentiment, with many interpreting it as a turning point for housing market conditions.
Although price growth has been moderate in most areas, some markets have surged by up to 6% in just three months, with inner Melbourne emerging as a standout.
According to PropTrack data, house prices in inner Melbourne rose 3.6%, while unit prices jumped 5.9% since the beginning of February. Though house prices remain slightly lower than a year ago, units have now posted positive annual growth—signalling a long-awaited turnaround for the Victorian capital.
“Home prices have underperformed the rest of the country so much and are now cheaper than Brisbane, Adelaide and on track to be cheaper than Perth,” said Anne Flaherty (pictured), REA Group senior economist. “That’s driving a lot of people to see value on the Melbourne market.”
Sentiment among Victorian buyers is clearly improving. REA Group’s Residential Audience Pulse survey revealed that 40% of Victorian respondents believe now is a good time to buy, the highest rate of any state.
“We've seen a really strong turnaround in how buyers view Melbourne,” Flaherty said.
“Consumer house price expectations recorded a particularly big 14% rise in Victoria, coming from a markedly weaker starting point,” said Westpac head of Australian macro-forecasting Matthew Hassan.
After being out of favour due to added taxes and compliance costs, investors are now re-entering Melbourne’s unit market, drawn by affordability and strong rental yields.
“Despite all the disincentives, the lower price point could be driving more people to consider investing,” Flaherty said.
“Last year, the investors were getting out of the market, but now with interest rates dropping we are noticing they are re-entering the market, particularly with units,” said BigginScott Richmond director Andrew Crotty.
“Rents are high so if you’re a first-home buyer or a young couple it’s the perfect time to jump in.”
Buyers are also expanding their search to surrounding areas as inner-city values rise.
“We’re getting a lot of people priced out of Fitzroy and Carlton who are coming over to Flemington and Kensington,” said Jayson Watts, principal at Nelson Alexander Flemington. “That hasn’t happened for about three years.
“We’ve seen the bottom of the market and talks of further rate cuts are starting to get people thinking that in 12 months’ time it’s going to be worth more.”
Other inner-city areas are also seeing solid growth. House prices in Sydney’s inner west rose 2.7%, while unit prices increased 3% in Melbourne’s inner south and 2.5% in Brisbane’s inner city, realestate.com.au reported.
“Overall Greater Sydney hasn't seen particularly strong growth year-on-year,” Flaherty said. “But we had seen prices decrease in December last year and now following the February rate cut we did see a jump.”
Matthew Hayson, Cobden Hayson director, added that buyers were most active in the $1.5 million to $3 million range, noting, “A lot of the stock that’s coming onto the market in that space is selling quickly.”
However, high-end properties are still facing hesitation.
“Anybody [who is] borrowing big is less confident,” Hayson said.
Darwin’s property market is also showing signs of life, with house prices up 3.3% and unit prices up 2.2% in the last three months.
“There was a 44% shortfall in new homes built in FY24, and a 49% shortfall in FY23,” Flaherty said. “That's one of the things that’s been underpinning Darwin.”
She noted Darwin’s attractiveness to investors.
“From an investing perspective, Darwin offers very high yields. The median price of home in Darwin is relatively low but the rents are relatively high,” Flaherty said.
While inner-city regions have surged in recent months, regional Queensland continues to dominate annual growth charts. Townsville led the way, with house prices up nearly 22% and unit prices climbing 23.6% year-on-year.
“Townsville has been an investor hotspot over the past 12 months so that's driven a lot of funds into the area that have pushed up the prices,” Flaherty said.
“Last year, we saw astronomical growth, and year-on-year it’s still the best performing region in the country.”
Still, growth has slowed compared to previous highs.
“The rate of growth in Townsville has definitely slowed down,” Flaherty said. “We’re seeing a bit of a shift in where investors are looking.”
