The article from MacroBusiness, published on January 22, 2025, discusses the relationship between interest rates and house prices in Australia. It highlights that both interest rates and house prices are expected to decrease concurrently in 2025. Key points include:
- Interest Rate Expectations: The Reserve Bank of Australia (RBA) is anticipated to cut interest rates in February 2025, with four or more rate cuts expected throughout the year due to factors like falling commodity prices and a weakening Australian economy, influenced by a decline in the terms of trade. This prediction is based on analyses from major banks like CBA and ANZ, which expect these reductions to stimulate economic activity.
- House Prices: The article suggests that house prices might continue to fall in the first half of 2025 before potentially rebounding later in the year as borrowing capacity increases due to lower mortgage rates. The narrative around house prices is mixed, with some data indicating that prices have been falling despite previous rate hikes, influenced by high mortgage rates reducing affordability and a slowdown in net overseas migration.

- Market Dynamics: There’s an expectation that the housing market could shift from a buyers’ to a sellers’ market in 2025, especially if the stock overhang clears out due to lower interest rates. However, the article also notes that affordability remains a significant issue, with current house prices still outpacing borrowing capacity for many Australians.
- Economic Context: The broader economic context includes a prediction of GDP growth acceleration, with the unemployment rate expected to rise slightly but inflation staying within target bands. This scenario is seen as supportive of the RBA’s decision to cut rates.
The article concludes with a nuanced view that while lower interest rates might stimulate house prices later in the year, the initial period could see continued price declines due to the existing economic conditions and high debt levels.
