‘Don’t assume’: reality check for Aussie homeowners

Aussies might be ‘past the worse’ when it comes to bleeding money on their homes but that doesn’t mean they are in the clear.

Aussies might be ‘past the worse’ when it comes to bleeding money on their homes but that doesn’t mean they are in the clear.

The Autumn auction season is now in full swing, with more than 2,500 homes nationwide going under the hammer each week.

Early signs are very positive, with the national clearance rate hovering around the mid-65 per cent mark in February. That’s about the level we saw in early Spring last year before the market began to cool off.

Higher auction volumes in March may test this strength, however, the first rate cut from the Reserve Bank is likely to boost market sentiment and this should spur on buyer activity.

Last month’s cut was the first since November 2020.

A 0.25 per cent cut will not make a material difference to household budgets, nor buyers’ ability to secure enough finance to buy a home affordably.

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Rates have been cut, but there might not be a flurry of further cuts.

But it does signal the start of a downward trend in rates (as long as inflation continues to fall) and this will give people confidence that we are past the worst it’s going to get in this cycle.

I’m expecting a spike in buyer activity following this first cut, and a more meaningful increase once we’ve seen three or four rate reductions.

However, it’s crucial that buyers assess their budgets carefully and not assume that more rate cuts will come quickly. The RBA Governor, Michele Bullock, has already stated that the RBA Board thinks the finance market’s expectations of three more cuts by mid-2026 are too ambitious at this stage.

So, it’s important to only buy at a price level that you find comfortable to manage over the long term.

This Autumn season may be a good time to buy given price weakness in many areas since November.

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Auction clearance rates are positive. Picture; Julian Andrews.

Between November 1 and January 31, CoreLogic data shows home values fell 1.4 per cent in Sydney, 2 per cent in Melbourne, 0.8 per cent in Hobart and 0.5 per cent in Canberra. The pace of growth in the rising markets of Perth, Brisbane and Adelaide also slowed substantially over this period, giving buyers some breathing room.

Now may be the time to capitalise on this weakness before further rate cuts occur.

More rate cuts – whenever they come – are likely to push up home values. In fact, CoreLogic research shows that for every 1 per cent cut to the cash rate, dwelling values rise by an average of 6.1 per cent.

Some markets are more responsive to rate cuts, with the research showing that popular family suburbs with higher median values tend to get a greater price uplift as rates go down.

In Sydney, for example, the research shows a 1 per cent rate cut pushed median house prices up 19 per cent in Leichhardt and the Sutherland-Menai-Heathcote area, 18 per cent in Warringah and 17 per cent in Parramatta.

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John McGrath says Now may be the time to capitalise before further rate cuts occur.

In Melbourne, median house prices rose 18 per cent in Whitehorse-West and Essendon and 17 per cent in Manningham-West and Boroondara.

In Brisbane, median house prices lifted 5 per cent in Sunnybank, Nathan and Brisbane Inner-North.

In Hobart, median house values rose by 6.5 per cent in the inner city and 5 per cent in the city’s North-East.

In the regions, median house prices rose by 12 per cent in Wollongong, almost 10 per cent in Kempsey-Nambucca, 6.5 per cent in the Gold Coast hinterland and Newcastle, and 6 per cent on Tasmania’s South East Coast.

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CoreLogic points out that median values in many of these suburbs are currently well below their peaks.

So, families seeking forever homes in these popular areas may be smart to buy this Autumn before a rate-inspired price upswing begins.

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Originally published as ‘Don’t assume’: reality check for Aussie homeowners