Page 2 - Wealth Adviser Newsletter March 2025

ISSUE 107
MARCH 2025

Home prices turned back up again in February
After a brief downswing, national average property prices Roughly speaking the 0.25% rate cut
hooked back up in February, reflecting the anticipation and when passed on to variable mortgage
then reality of the RBA starting to cut rates. Most cities saw
gains between 0.2%mom to 0.4%mom with the recent losers rates will add about $9000 to how
of Melbourne, Hobart, Canberra and Sydney picking up as much a buyer on average earnings can
the booming cities of the last two years – Brisbane, Adelaide borrow which along with three further
and Perth – continue to slow as poor affordability impacts rate cuts into early next year will drive
them.
a significant increase in the capacity
of buyers to pay for a property.

positive for property because they take pressure off
existing homeowners who may have been struggling
with their mortgages leading to less distressed listings
and as they increase the amount a borrower can borrow
from a bank and hence pay for a property which supports
demand. Buyers know this and so rate cuts also provide a
boost to buyer sentiment and that is what we have most-
ly seen in improved auction clearances and now higher
prices so far this year. Roughly speaking the 0.25% rate
cut when passed on to variable mortgage rates will add
Source: CoreLogic about $9000 to how much a buyer on average earnings
can borrow which along with three further rate cuts into
The downswing just saw a 0.4% fall in national average early next year will drive a significant increase in the ca-
prices spread over 3 months, with falls in Hobart, Canberra, pacity of buyers to pay for a property. See the next chart
Melbourne, Darwin and Sydney partly offset by continued which also allows for wages growth over the year ahead.
gains in Brisbane, Adelaide, Perth and regional areas.

Source: RBA, CoreLogic, AMP

Source: CoreLogic, AMP • The rate cuts are also occurring against a backdrop of an
ongoing housing shortage which we have seen over the
Expect further gains in average property prices last few years provides a source of support for prices.
Further gains are likely as interest rates fall further and We estimate the accumulated housing shortfall to be
the shortage of property remains, provided unemployment around 200,000 dwellings at least, and possibly as high
doesn’t rise too far. The upswing is likely to be more appar- as 300,000 dwellings. It is likely to remain significant
ent through the second half as we see more rate cuts. for a while yet as building approvals running just above
• We expect three more RBA 0.25% rate cuts by early next 180,000 dwellings a year indicate that housing comple-
year – in May, August and February. Lower rates are tions are likely to run below government objectives for

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