Will Interest Rates Finally Drop? What It Means for Buyers and Investors

Property experts are eagerly awaiting the Reserve Bank of Australia's (RBA) announcement on February 18, hoping for a much-anticipated interest rate cut. According to Ratetracker on the ASX Securities website, which monitors rate cut probabilities, the likelihood of a rate reduction has jumped from 73% to 95% in just two weeks.

Inflation and Building Approvals – A Positive Sign?

The latest inflation data, released last Wednesday, shows inflation now sitting at 2.4%. This figure falls comfortably within the RBA’s target range of 2-3%, increasing the possibility of a rate cut.

Meanwhile, building approval figures released on February 3 reveal a 0.7% rise nationwide. NSW recorded a substantial 19.1% jump in approvals, while Victoria experienced a decline of 11.7%.

Housing Market Trends – Winners and Losers

CoreLogic’s January home price data reveals mixed results across Australia’s capital cities. Three out of eight capital cities saw declines in median home prices:

·         Melbourne: Down 0.6%

·         Sydney: Down 0.4%

·         Canberra: Down 0.5%

On the other hand, some markets showed steady growth:

·         Adelaide: Up 0.7%

·         Perth & Brisbane: Continuing their strong upward trends

Over a 12-month period, Perth leads with a 17.1% growth rate, followed by Adelaide at 12.7% and Brisbane at 10.4%.

Melbourne, however, has declined by 3.3% across all dwelling types over the past year, with regional Victoria seeing a 1.9% drop.

Rental Market – Slowing but Still Rising

National rental prices increased by 4.8% in 2024, a slower pace compared to 8.1% in 2023 and 9.5% in 2022.

Victoria’s rental market remains stable, with a 4.1% increase and a median rent of $604 per week. January saw rental price increases moderate further to 3.5% for houses and 3.8% for units. However, with home prices declining, rental yields for investors are on the rise.

Why Melbourne is a Great Buying Opportunity

With Melbourne’s home prices experiencing four years of suppression, it presents one of the best-value markets for buyers and investors in Australia. Looking ahead, the potential for capital growth over the next decade could outperform other states and territories.

While market conditions are shifting, always seek independent financial, legal, or taxation advice before making any property decisions.