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One week after the RBA's historic rate cut, we're already seeing tangible impacts across the property market. The combined capital city preliminary clearance rate has remained above 70% for the second consecutive week, hitting 72.1% - the highest level since July 2024. This comes alongside auction volumes reaching their highest point since December, with 2,820 homes taken to auction across the combined capitals.
Banks Respond to RBA's Signal
The RBA's decision to reduce the cash rate from 4.35% to 4.10% marks the end of the most aggressive rate hiking cycle on record. The big four banks, who collectively hold $1.546 trillion in owner-occupied mortgages (72% of the market), have responded swiftly:
- ANZ: 5.84% (effective February 28)
- CommBank: 5.90% (effective February 28)
- NAB: 6.19% (effective February 28)
- Westpac: 6.19% (effective March 4)
Auction Markets Spring to Life
The latest auction data shows remarkable strength:
- Melbourne recorded 1,467 auctions - the highest weekly volume since October 2024, with a preliminary clearance rate of 72.1% (the highest since July 2024)
- Sydney saw 959 properties go under the hammer - the highest volume since December 2024, maintaining a strong clearance rate of 74.4%
These figures represent a significant shift in market psychology, with buyer confidence clearly returning as the rate cut cycle begins.
Immediate Impact for Property Investors
The 25bp cut is already providing tangible relief for borrowers:
- Average mortgage rates for owner-occupier loans moving from 6.32% to 6.07%
- Monthly savings of $103 on the average home loan of $641,416
- Borrowing capacity increase of approximately $13,000 for the average home buyer
While these immediate impacts may seem modest, they represent the beginning of what economists expect to be multiple cuts throughout 2025, with cumulative effects significantly boosting investor purchasing power.
Market Fundamentals Remain Exceptionally Strong
Recent data underscores the robust foundation of Australia's property market:
- Total value of Australian residential real estate: $11.1 trillion (January 2025)
- Outstanding residential mortgages: $2.4 trillion
- National Loan to Value ratio: just 21%
- Residential property represents 55.9% of total Australian household wealth
These statistics highlight why property remains a cornerstone of Australian wealth creation, and why all major stakeholders - banks, government, and the RBA - are invested in maintaining market stability.
Strategic Entry Point Emerging
Current property data shows interesting trends that may signal opportunity:
- Sydney values: 1.7% decline since September peak
- Melbourne: 7% decline since March 2022 high
These figures suggest we may be approaching a market floor in our major cities, creating a timely entry point for investors before the full impact of rate cuts drives prices higher.
On The Ground Perspective
Melbourne investor Paul Edward Gradie captures the current market sentiment: "The rate cut was welcomed, but I'm worried it will make my next purchase harder... I expect more competition," he says. Planning to buy his second investment property, Gradie notes, "The small increase in the amount we can borrow will most likely be erased by the potential increase in prices."
This perspective highlights the opportunity cost of waiting - early movers in the rate cut cycle often capture the strongest gains before broader market participation drives competition.
Seven Critical Market Drivers
1. Critical Supply-Demand Imbalance
The current market features unprecedented demand from strong immigration, while new construction remains limited. More importantly, the cost of new construction makes it financially unviable at current market prices, creating inherent value or "intrinsic equity" in established properties.
2. Strong Economic Foundation
Australia's economy continues to show resilience through:
- Historically low unemployment rates
- Ongoing Federal and State infrastructure investments
- Sustained government spending initiatives
These factors continue to drive both economic and employment growth.
3. Interest Rate Cycle Shift
With rates now confirmed to have peaked at 4.35%, we're entering a new phase:
- Numbers that work today will likely improve as rates drop
- Market psychology shifting from FOBE (Fear of Buying Early) to FOMO
- Pent-up demand expected to release as confidence returns
4. Rental Market Dynamics
The rental crisis continues to create favourable conditions for investors:
- Historically low vacancy rates persist
- Rents continue their upward trajectory
- Improving cashflow positions for property investors
5. Rising Consumer Confidence
A significant shift is occurring in market sentiment:
- Inflation showing signs of control
- Interest rates now cutting rather than hiking
- Economic resilience proving the "doom and gloom" predictions wrong
This creates a unique window of opportunity before broader market participation increases.
6. International Investment Return
Foreign investors are actively returning to the Australian property market, providing additional support for property values and creating extra competitive pressure in key markets.
7. Economic Forces Working in Your Favour
The property market's fundamental structure supports long-term investor success:
- Market size ensures government and banking sector support
- Inflation creates natural upward pressure on both property values and rents
- Fixed debt amounts become relatively smaller over time while gains accrue to investors
Why This Matters Now
While timing the market perfectly is impossible (the absolute bottom was in early-2023), current conditions present a rare alignment of positive factors:
- Rate cuts beginning
- Strong market fundamentals
- Clear growth drivers
- Institutional support
How Futurerent Can Help
Many of our clients are recognising this positive market moment and taking action to position themselves advantageously. Whether you're looking to expand your portfolio or access capital for renovations to maximise returns on existing properties, our team can help you access up to $100K of your future rent today.
