Falling rates, rising confidence: what it means for property buyers

With spring on our doorstep, the days getting longer, and a touch more warmth in the air, all indications are that we’re heading into a very strong spring property season and a strong finish to 2025.

The latest GDP figures show that the Australian economy barely grew in the March quarter - up just 0.3 per cent for the year.

Growth was mainly driven by household spending on essentials like electricity and gas, which is not an encouraging way to see GDP boosted.

It was, however, pleasing to also see private sector investment rising, led by housing, construction, mining, and manufacturing. Overall, though, it wasn’t the best set of figures.

In terms of interest rates, it is quite usual that reductions are only made by the Reserve Bank as a necessary measure to stimulate economic activity.

With the latest GDP figures and further evidence that inflation is now relatively under control, there was no reason for the Reserve Bank to hold back on an interest rate cut.

While in the past year we’ve had some disappointing decisions from the central bank, it was pleasing this time to see the much-anticipated reduction come through.

The timing - at the beginning of the spring selling season - will undoubtedly stimulate greater buyer activity.

Australian housing affordability has recently improved for the first time in 12 months.

Average loan repayments now amount to 48 per cent of median family income, an improvement of 2 percentage points. That compares with a 1 per cent decline over the full year, which highlights just how much worse affordability was last year.

The latest quarterly improvement is the largest since March 2016. Housing affordability improved in all states and territories except the Northern Territory.

We can attribute this to two main factors: rising median family incomes, now $2,561 per week (1.1 per cent higher than last quarter and 4.0 per cent higher than last year); and interest rate cuts, which reduced the average monthly loan repayment by 2.9 per cent, from $5,323 to $5,233, even before this month’s further rate cut.

For renters, the quarter brought a second consecutive modest improvement in affordability - except in Queensland, where continued population growth is driving rents higher.

While this is challenging for renters, it is positive for investors and landlords as it helps offset the rising costs of owning investment properties.

It is also pleasing to see first home buyers so active. They made up 35.7 per cent of all owner-occupied dwelling loan commitments last quarter, supported by favourable lending conditions and the best set of government grants in years.

First home buyers should absolutely take advantage of these conditions, especially given they can now rent out properties rather than being compelled to live in them.

With yet another fall in interest rates, we are likely to see strengthening property prices. That means higher borrowings for buyers, putting more pressure on household budgets.

So, while there is some welcome relief, there is no room to ease off the urgency to act. Lower interest rates trigger more buyer activity, which in turn puts upward pressure on prices.

The time to buy never looks perfect in the moment. It only seems obvious six to 12 months later. We all wish we’d bought last year, or the year before, and next year many will wish they’d bought in 2025.

The fundamentals remain rock-solid for a strong property market in the foreseeable future.

Any delay in entering the market will only result in higher purchase prices, larger loans, and a bigger slice of the household budget being consumed. It is wise to make the move today.