Financial markets are near certain of a July rate cut, as Melbourne notches its seventh consecutive week above 70% clearance rates. With less than 1% of households in negative equity and strategic investors returning en masse, we're witnessing the last window of opportunity before widespread FOMO takes hold in some markets. Following two cuts already this year, the RBA's cash rate is headed to 3.1% by Christmas, setting the stage for what could be a 10-15% price surge over the next 12 months.
Something big is happening in Australia's property markets right now, and many investors are already taking notice. The Reserve Bank has already cut rates twice this year, and when the experts are this confident about what's coming next – with predictions ranging from 86% probability according to the Australian Stock Exchange to 97% per Westpac analysis – you know it's time to pay attention. A July cut would bring the cash rate down to 3.60%, a level we haven't seen since April 2023, and that's just the beginning.
What makes this moment particularly exciting is how strong Australian households have become. We've gone from 1.5% of homeowners in negative equity before COVID to less than 1% today. Half of all homeowners have paid off their mortgages completely, while those still paying off their loans are sitting on an average of $67,000 in savings and offset accounts. This isn't the start of a market built on wishful thinking – it's one backed by real financial strength and improving conditions.
Key Highlights
- Markets price 86% - 97% probability of 8th July rate cut, with cash rate forecast to hit 3.1% by year-end
- Melbourne records seventh consecutive week with clearance rates above 70%, leading national recovery
- National dwelling values up 1.7% in first five months of 2025 despite economic headwinds
- Sydney's inner west suburbs surge up to $211,255 (8.9%) in just three months
- Less than 1% of households in negative equity, down from 1.5% pre-COVID
- 15% of young Australians have saved enough for 5% deposit under government scheme
- Population forecast to reach 30 million by 2030, underpinning long-term demand
Markets Lock In July Cut
According to financial markets, the Reserve Bank's next cash rate cut is pretty much a done deal when they next meet on 7-8th July. According to Westpac's analysis, markets are giving it a 86% - 97% chance that RBA Governor Michele Bullock will deliver the third rate cut this year, bringing the cash rate down from 3.85% to 3.60%.
Probability of a 0.25ppt rate cut at the RBA's 7-8 July meeting (%)
Probability implied by financial market pricing
A third rate cut by July is a huge shift in thinking. What's even more interesting is where the experts think we're heading: financial markets predict the central bank will cut the cash rate to 3.1% by the end of the year. NAB goes even further, with their chief economist Sally Auld forecasting that the cash rate will be cut to 2.6% by early-2026." That 2.6% level? We haven't seen rates that low since October 2022, back when we were just coming out of pandemic lockdowns.
Impact of four potential rate cuts
Notes: based on owner-occupier paying principal and interest with 25 years remaining in July 2025 on the estimated RBA average variable rate of 5.80%. Assumes cash rates cut are in August, November, February and May and passed on in full the month after.
The global situation adds another twist to the story. After US President Donald Trump announced and then quickly backtracked on a range of tariffs, the uncertainty has actually strengthened the case for Australian rate cuts. As Sally Auld explains: "Shifts in US trade policy are likely to be net disinflationary for Australia. Consequently, the RBA will need to normalise rates quickly to ensure policy is appropriately calibrated."
The shift in expert opinion has been remarkable. JPMorgan made its first change to its RBA prediction in nearly two years, bringing forward its forecast from August to July. "We think the board will want to get back towards neutral a bit more quickly now that upside risks to inflation have been quashed and in case trade disruptions damage growth in the second half of the year," explained JPMorgan economist Jack Stinson.
Perhaps most interesting is that former RBA chief economist Luci Ellis, now at Westpac, has raised some tough questions about whether the central bank has waited too long. "As we have been highlighting for some time, underlying growth in Australia remains weak and sensitive to pauses in the expansion in the care economy," Ellis pointed out, suggesting the RBA might be "behind the curve."
Even Warren Hogan from EQ Economics, who used to argue for higher rates, has done a complete 180. He's now calling for the RBA to cut the cash rate by 0.35 percentage points to 3.5% next month. "Despite a genuine boost to real disposable incomes, Australian consumers are unwilling to loosen the purse strings in a meaningful way," he noted.
"The gap between rate cuts being announced and prices moving higher is getting smaller every day. When you see this level of certainty in rate markets – 97% is about as close to a sure thing as markets get – it signals a major shift in the investment landscape," says Godfrey Dinh, CEO of Futurerent.
Why Interest Rate Cuts Matter
The prospect of multiple rate cuts isn't just abstract economic theory – it translates directly into dollars in buyers' pockets and, ultimately, property prices. Canstar's analysis reveals exactly what's at stake: a single 0.25 percentage point cut could reduce monthly repayments on a $600,000 mortgage by $90.
But we're not talking about just one cut. If Westpac's forecast proves correct, with cuts in August, November, February, and May, homeowners could see their monthly repayments drop by $349. That's over $4,000 annually – money that either improves affordability for stretched buyers or, more likely, gets capitalised into higher property prices as buyers increase their offers.
Bank of Queensland chief economist Peter Munckton has studied four decades of data and reached a compelling conclusion: a 10-15% price rise over the next two years is "a reasonable bet" regardless of how many cuts the RBA delivers. His research shows that significant price rises typically follow rate cutting cycles, with some spectacular historical precedents.
Change in house prices in the two years after the start of a rate cut cycle (%)
"There were smaller price rises in both the early 1980s and 1990s. But on both those occasions, the unemployment rate was above 10%. Currently, the unemployment rate is within touching distance of 50-year lows," Munckton notes. This distinction is crucial – we're cutting rates from a position of economic strength, not weakness.
The flip side provides important context too. Munckton observes that the extraordinary 20%-plus gains seen in the '80s, '00s, and during the pandemic "seem off the cards over the next couple of years." This suggests we're looking at solid, sustainable growth rather than a speculative bubble.
Three of the big four banks expect the RBA to cut to 3.60% at the August meeting, with NAB the outlier predicting the next cut will come on July 8. Regardless of the exact timing, the trajectory is clear: rates are heading lower, and fast.
"Every rate cut adds fuel to property prices, but the real accelerant is certainty; buyers stop waiting and start acting and that's when you see prices move quickly”, notes Godfrey Dinh, CEO of Futurerent.
The $860 Billion Wealth Effect
Here's something that should get every property investor excited: over the next decade, rising population, more jobs, and growing incomes are expected to add around $860 billion to Australian household wealth – and history shows a big chunk of this money tends to find its way into property.
Key growth drivers
This isn't just wishful thinking. Remember that Australians typically spend between 13% and 20% of their income on either rent or mortgage payments. With $860 billion in extra income over the coming decade, even conservative maths suggests hundreds of billions will flow into housing.
The foundation for this wealth boom is already rock solid. Less than 1% of Australian households are currently in negative equity – a huge improvement from the 1.5% we saw in early 2019 before COVID. Even better, most mortgage holders have loan-to-value ratios well below 80%, with many sitting comfortably in the 40-60% range.
Here's a number that really stands out: 50% of Australian homeowners have paid off their mortgages completely. That's half the market sitting on valuable property with zero debt, perfectly placed to upgrade, invest, or help their kids get into the market. Even more impressive, a third of all properties last year were bought with cash – no mortgage at all. That shows just how much wealth is already out there supporting our markets.
This financial strength means that even if things get tough economically, forced sales are likely to stay low. Most homeowners have enough equity to ride out any rough patches, which prevents the kind of distressed sales that could push prices down.
For those still paying off their homes, the picture looks pretty good too. Westpac research shows that mortgage holders have an average of $67,000 in savings and offset accounts. Sure, there's definitely a group with less than $10,000 saved, but overall, people are getting their finances in better shape.
"While this share is down on a year ago, there is clearly still a large portion of mortgagors that would struggle in the event of a negative income shock," the Westpac Housing Monthly report notes. But here's the key thing – this vulnerable group is getting smaller, not bigger.
"The combination of record-low negative equity rates and healthy household savings creates a really strong safety net for our property markets," observes Godfrey Dinh, CEO of Futurerent. "This isn't like America in 2008 – this is a market backed by real household wealth and financial stability."
Melbourne's Seven-Week Streak
While Sydney often steals the spotlight, Melbourne has quietly become Australia's strongest auction market, chalking up its seventh week in a row with clearance rates above 70%. Last weekend's 72.2% success rate from 1,030 auctions wasn't just another good result – it shows a market that's genuinely turned the corner.
To really appreciate what's happening, remember that Melbourne has struggled for years, hit hard by extended lockdowns and a slower bounce-back. Now, it's consistently beating every other major city, including Sydney which managed 70.5% from 836 auctions – and that was Sydney's first result above 70% in three weeks.
Tim Lawless from Cotality puts it plainly: "There's growing evidence that Melbourne has moved through an inflection, becoming one of the nation's stronger markets from a clearance rate perspective. We're seeing consistent value growth returning to that market as well."
The difference with other cities is pretty clear. Brisbane managed just 61.4% from 127 auctions, while Adelaide hit 67.1% from 133 properties. These were the hot markets not long ago, but the momentum has definitely shifted south. Even Canberra, at 60.7%, is finding it tough to keep buyers interested.
Lawless reckons Melbourne's comeback is down to several things: "It's probably a reflection of either just the affordability advantage it has – maybe some renewed investment interest, given its fairly soft history. It's probably the early phase of its growth cycle as well." That last bit is really important – if Melbourne is just getting started while other cities are cooling off, the opportunity for investors is obvious.
What's really surprising is how strong things are staying through winter. "It might be a relatively active winter selling season, and if I'm right in that, then you have to think that spring will probably be quite a busy one as well," Lawless predicts. For a market that usually goes quiet during the colder months, this continued strength suggests something big has changed.
Sydney's Inner West Phenomenon
While Melbourne grabs headlines for its auction performance, Sydney's inner west is quietly delivering spectacular returns that should have every investor paying attention. North Strathfield topped the quarterly growth charts with an eye-watering 8.9% increase – that's $211,255 added to the median house price in just three months, taking it to $2,583,539.
This isn't an isolated pocket of growth. The entire inner west corridor is surging: Rodd Point jumped 7% ($203,121), Abbotsford climbed 6.9% ($220,147), and Concord West added 6.3% ($168,158). These aren't percentage points on a spreadsheet – they represent hundreds of thousands of dollars in real wealth creation for property owners.
Top 10 suburbs with strongest quarterly value growth
Data is for houses only
What's driving this extraordinary growth? The answer lies in the perfect storm of scarcity, infrastructure, and rezoning. These suburbs sit within the NSW government's Transport-Oriented Development (TOD) zones, earmarked for significant density increases around transport hubs. The Homebush TOD precinct alone covers 200 hectares between Sydney and Parramatta CBDs.
Cotality's head of Australian research, Eliza Owen, explains the dynamics: "They are going to benefit from proximity to the new Metro West station, and there might be pockets that fall into the transport-oriented development plans. Prices will probably get a further boost from the new infrastructure and rezoning, especially from a house perspective, as they can be redeveloped into duplexes, low- or mid-rise housing for greater profit."
The rezoning impact is already creating windfall gains. Inner West Nest buyer's advocate Hamada Alameddine shares a stunning example: "One of my clients bought a property in North Strathfield last year. They knew the rezoning was coming and that they would have to offload to buy something else. They put their property back on the market and sold it for a $300,000 increase in less than 12 months."
PRD Real Estate chief economist Dr Diaswati Mardiasmo attributes the price surge to fundamental scarcity: "There's a reliance on people selling as opposed to new houses coming through. It's definitely a scarcity issue, not only from the perspective of what's on the market but also what's available in the future." She adds pointedly: "They know the land value will keep going up, and they know the scarcity of their product."
First Home Buyer Revolution Set for 2026
Come January 1, 2026, Australia's property market will experience a demand shock unlike anything we've seen in recent years. Prime Minister Anthony Albanese's expansion of the First Home Guarantee scheme will effectively open the floodgates, allowing virtually all first home buyers to enter the market with just a 5% deposit.
The changes are sweeping: the $125,000 income cap will be scrapped entirely, the scheme will be available to unlimited applicants instead of just 35,000 per year, and property price thresholds will be dramatically raised. For context, this transforms a limited assistance program into a universal entitlement that could reshape the entire lower end of the property market.
The numbers reveal just how many buyers are waiting in the wings. According to Westpac analysis, 15% of 25 to 34-year-olds who don't currently have a mortgage have saved at least $41,000 – enough for a 5% deposit on a median-valued home of $825,000 through the First Home Guarantee. That translates to approximately 400,000 young Australians who qualify for the scheme but haven't yet pulled the trigger.
Mortgage broker Rebecca Jarrett-Dalton from Two Red Shoes sees the opportunity clearly: "Sometimes it's better to be in the market even with a slightly higher cost, rather than trying to out-save growing house prices, and in the future you can refinance to save interest."
The contrast with traditional buying is stark – only 4% of potential first home buyers have saved enough for a conventional 20% deposit. This means the government scheme could increase the pool of active buyers by nearly four times, all competing for the same limited housing stock.
But there's a catch that Westpac senior economist Matthew Hassan highlights: while 400,000 young Australians technically qualify, "tight serviceability tests are creating exclusions." This suggests that as interest rates fall and serviceability improves, even more buyers will qualify, creating a progressive wave of demand through 2026.
Strategic Implications for Investors
Everything we're seeing right now – the almost certain rate cuts, Melbourne's impressive auction run, Sydney's rezoning gains, and the coming first home buyer wave – adds up to a pretty clear message for investors. But making the most of it requires thinking strategically, not just jumping in anywhere.
First up, timing really matters. With markets near certain of a July cut and expecting rates to hit 3.1% by Christmas, the window to get ahead of the crowd is closing fast. History shows us that property prices start climbing when rate cuts look likely, not after they happen. We're already seeing this with national property values up 1.7% in just five months.
Second, picking the right location has never been more important. The idea of the "20-minute neighbourhood" is changing how we value property. People are happy to pay more to live somewhere they can work, shop, and play within a 20-minute drive, bike ride, or walk from home. Inner and middle-ring suburbs that tick these boxes are leaving outer areas in the dust.
Third, look for areas where local incomes are growing faster than average. Suburbs that are gentrifying attract wealthier residents who can afford to pay top dollar. These areas usually give you the double win of strong rental growth and better capital gains.
Fourth, don't overlook the Melbourne opportunity. After years of playing second fiddle, the city's seven-week auction winning streak shows a market that's just warming up. With prices still lower than Sydney and more people moving from interstate, Melbourne offers real value for investors ready to move before everyone else catches on.
Finally, get ready for the 2026 first home buyer surge. With 400,000 potential buyers waiting to use the expanded government scheme, properties that suit first-timers in good locations could see huge demand. Just remember – these buyers will be competing at the cheaper end of the market, which could push other buyers up the property ladder.
Market Outlook
Australia's property market is at an exciting turning point. The near certainty of a July rate cut isn't just another number – it's a clear sign that the market is about to shift gears in a big way.
The near-term outlook looks really positive. With property values already up across most markets this year despite all the economic challenges, adding multiple rate cuts to the mix creates serious momentum. Financial markets expect the cash rate to hit 3.1% by Christmas, with NAB predicting an even bigger drop to 2.6% by early 2026. Domain's latest forecast backs this up, predicting record-high prices in Sydney, Brisbane, and Adelaide by the end of FY26.
Melbourne's rise to the top of the auction league table tells us something important about where we are in the cycle. After years of lagging behind, Australia's second-biggest city is playing catch-up, helped by better affordability and renewed investor interest. This kind of rotation usually marks the start of a new growth phase, not the end.
The supply and demand story keeps getting better for property owners. With Australia's population expected to hit 30 million by 2030 – that's nearly 3 million more people needing somewhere to live – the fundamental driver of property values isn't going anywhere. This population growth, combined with not enough new homes being built, puts a solid floor under property prices.
Making things even tighter is the migration-driven rental crisis. With only 38% of migrants owning a home after five years in Australia (though this jumps to 71% after 10 years), the rental market faces ongoing pressure with "no end in sight for our rental crisis" according to market watchers. This constant rental demand keeps investor returns healthy while these migrants gradually save up to buy.
Perhaps most importantly, buyer psychology is shifting. As FOMO starts to kick in, buyers are realising that property values are rising and the media keeps talking about new record prices being hit. This creates a snowball effect – rising prices attract more buyers, which pushes prices even higher. And we're just at the beginning of this cycle.
Looking ahead to January 2026, the expansion of first home buyer support could be a real game-changer. Removing income caps and offering unlimited places could release a flood of pent-up demand that completely changes the cheaper end of the market and sends ripples all the way up the property ladder.
For strategic investors, the message is clear: the confluence of rate cuts, improving household finances, and structural undersupply creates conditions typically associated with significant price growth. While the spectacular 20%-plus gains of previous cycles may be unlikely, the 10-15% growth forecast in some markets by economists over the next twelve months represents meaningful wealth creation.
How Futurerent Can Support You
Property investors know that prices grow faster than you can save. And even with a foot on the property ladder, taking the next step shouldn't mean asking the bank's permission or signing up to another lifetime of interest when all you need is to unlock what's already yours.
What if you could access that equity without refinancing, selling the property, or waiting until it's too late?
That's why investors turn to Futurerent - to unlock their equity without the usual trade-offs. There's no refinancing, no painful paperwork, and no impact on your credit score.
Futurerent helps investors cash out up to $100,000 per property, with funds in your account in just 2 business days. The property returns the cash out from a fixed portion of the rent over 3 years.
With market conditions suggesting significant opportunities ahead, having quick access to capital could make all the difference in securing your next investment before prices potentially move higher.
