Australia’s housing market has surged to a new record high in February following a widely anticipated interest rate cut by the Reserve Bank of Australia (RBA). After two months of declining prices, this turnaround suggests a shift in buyer sentiment and renewed activity in the property market.
News reports indicate that the latest rate adjustment has encouraged more buyers to re-enter the market, although affordability constraints remain a concern. While the long-term impact is uncertain, early signs point to a stabilising housing sector.
Home Prices Rebound After RBA Rate Cut
The PropTrack Home Price Index recorded a 0.4% increase in national home values last month, pushing prices 3.94% higher compared to February 2024. This follows minor declines of 0.08% in January and 0.17% in December.
The rate cut—25 basis points from 4.35% to 4.10%—was announced on 18 February, with major banks swiftly adjusting their mortgage rates. The move has boosted borrowing capacity, which, in turn, has increased buyer activity.
However, experts note that affordability constraints could limit the scale of price growth. Unlike the 23.7% surge in home prices in 2021 following emergency-level rate cuts, analysts expect a more measured increase due to stretched affordability.
Melbourne and Sydney Lead Price Gains
Among capital cities, Melbourne experienced the highest monthly growth, with a 0.67% increase, followed by Sydney, where home values rose 0.50%.
Despite Sydney reaching a record high, its prices have risen just 2.7% over the past year, indicating that affordability constraints and high interest rates have capped further gains.
Hobart was the only capital to record a slight decline (-0.03%), while Perth, which had previously led national growth, saw only a marginal rise of 0.02%.
Melbourne’s turnaround is particularly notable, as the city’s property market has underperformed in recent years. Factors such as higher property taxes, weaker economic conditions, and increased housing supply have contributed to subdued price growth.
Despite the recent rise, Melbourne home values remain 4.74% below their March 2022 peak, making the city more affordable relative to other capitals.
Additionally, Victoria has emerged as a first-time buyer hub, accounting for one-third of all first-home buyer purchases in Australia, according to Australian Bureau of Statistics (ABS) loan data.
Investors Return to Melbourne’s Market
Investor activity in Melbourne has picked up significantly, particularly from buyers in Adelaide, Perth, and Brisbane.
Many investors who saw strong equity gains in their home states are now looking for opportunities in Melbourne, where relative affordability and higher rental yields present an attractive option.
According to Melbourne buyer’s agent Cate Bakos, this investor movement is linked to the “wealth effect”, where equity gains encourage investors to expand their property portfolios.
“We’ve had really strong investor interest from interstate, and my dominant batch of investors are from Adelaide, Perth and Brisbane,” she said.
“They’re looking for a different market where they can capitalise on potential growth.”
This sentiment shift has also impacted local buyers, many of whom are now entering the market in fear of missing out on another rapid price surge, like in 2021.
Brisbane’s Housing Market : Unit Market Outpaces Houses
Brisbane’s property market remains strong, particularly in the apartment sector, where unit values have surged 13.8% over the past year to reach a median of £675,000.
In contrast, house prices in Brisbane increased by 9.6%, reaching a median of £977,000. The affordability gap—where units remain around £300,000 cheaper than houses—has driven more buyers towards apartments, especially as overall property prices rise.
Brisbane has now become Australia’s second-most expensive capital city, a remarkable shift given its previous affordability advantage.
According to Ray White Inner Brisbane Apartments principal Colin Walsh, demand for apartments is at its highest level in years, fuelled by strong population growth and affordability pressures.
“There’s more people looking to purchase, and units are a more affordable commodity than houses,” -he said
