Victorian home prices: Where rate cuts will add $10,000-plus to property values in a month

Houses in almost 200 Victorian suburbs and towns could be set for a $10,000 or more windfall within a month of the next interest rate cut. And there’s one part of Melbourne that’s set to boom.

Nathan Mawby

@mrmawby

5 min read

October 5, 2024 - 5:00AM

15 Gallery Place, Wheelers Hill, recently sold for $2.45m, but could surge to $2,482,585 after the next rate cut if historic trends repeat.

House prices are set to surge upwards of $10,000 in the space of a month in 188 Victorian suburbs and towns when interest rates are cut.

Analysis from Ray White’s economics team show Melbourne’s east is likely to notch the biggest boosts, with Toorak’s $3.952m median house price putting it on top with a $36,000 (0.9 per cent) increase expected.

But the best performing suburbs by percentage after a rate cut historically centre on family-friendly postcodes with good schools, such as Doncaster East, Templestowe, Glen Waverley, Vermont and Wheelers Hill heading the list.

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And a home price boost is expected across the state, with the analysis recording an uptick within four weeks of the Reserve Bank starting its last four reduction cycles, excluding emergency cuts during the pandemic.

Ray White chief economist Nerida Conisbee said the impact from the next rate cut could be even bigger than history dictated in some areas, and as little as a month away.

Ms Conisbee said Melbourne and Sydney were Australia’s most-sensitive cities to rate cuts due to high house prices and would broadly see the biggest response.

However Victoria’s figures could be moderated by the state’s high property taxes, which Ms Conisbee said were the main reason Melbourne had not followed Sydney into a price boom that’s added tens of thousands of dollars to the Harbour City’s median house price in the past year.

7 Peartree Court, Doncaster East, sold $2,051,000 recently — but the suburb’s average 1.4% increase after a rate cut could add more than $28,000 to that figure.

“If Melbourne didn’t have the tax challenges at the moment, I think it would be looking at a fairly similar market to Sydney,” Ms Conisbee said.

Other major factors that could influence home price growth are the cost of living, the supply of new homes, population growthand how positive the Reserve Bank is.

“If most people are expecting four cuts next year, that will change sentiment to be far more positive,” Ms Conisbee said.

The economist said she believed there would be a rate cut before Christmas or March at the latest, but that it would only be a 0.25 per cent improvement for mortgage holders.

Australian Bureau of Statistics figures show that in 2019, when this last occurred outside of the pandemic, there was a 5.1 per cent jump in loans to households for dwellings excluding refinancing.

Ms Conisbee said if there was a 0.5 percentage point cut, it could lead to an even bigger increase — but probably wouldn’t double the benefit.

A rate cut could also help “stabilise” the rental market, as many landlords had raised rents to accommodate heightened interest payments.

5 Wimbourne Court, Wantirna, last changed hands for $1.35m — but could be worth more than $1.367m after the next rate cut.

“If that cost goes down, it won’t be so hard to pay a loan and you might not be so motivated to raise rents,” Ms Conisbee said.

But she warned first-home buyers were likely to struggle in a fast-moving market, particularly as sudden price increases would add to their deposit threshold.

Mortgage Choice broker David Thurmond runs businesses across Melbourne’s east and south east and said there were large numbers of families who had been putting off their next home purchase for two years as their borrowing capacity and confidence suffered.

“A lot of the clients I am speaking to are wanting to purchase for more than they can currently afford, and a lot of the discussion is about waiting for rates to cut,” Mr Thurmond said.

“There’s definitely pent-up demand in Melbourne, when the interest rates rise as high as they have gone, we have delayed that normal cycle.

“I’d be surprised if prices don’t jump.”

However, he said the buying public did not seem to think there would be a rate cut this side of Christmas — with few people seeking to lock in pre-approval for home loans at the moment.

33 Chauvel St, Bentleigh East, is in a part of Melbourne where an interest-rate cut could add 1.31 per cent to its $911,500 value.

“But if everyone is waiting for that, everyone jumps at the same time and prices rise, even before the rates actually go down,” Mr Thurmond said.

Mr Thurmond said a 0.25 per cent rate cut could add about $50,000 to the borrowing capacity of a person earning $100,000 a year. For a household on $200,000 that could be closer to $100,000.

Damian and Adele Corney have just upsized in Doncaster as their kids Alessia, 8, and Sienna, 3, grow.

Ironically they’ve moved about 350m from where they were, but after facing fierce competition as they tried to buy their prior home in the area amid a rate cutting cycle in 2019 they’re thrilled they’ve been able to purchase as quickly as they have.

“I think we have bought at a good time as the market has shifted down a little bit since we sold in March,” Mr Corney said.

“And I’m happy we made the effort and purchased this year. If we had waited I don’t think we would have been buying something in this suburb.”

The boss of design business Graffico, he added that there were signs of rising confidence among business and he felt discussions around interest rate rises had shifted from “is this ever going to end” to confidence in better times ahead.

10 Foote St, Templestowe Lower, made $1.95m in a recent sale, but with a 1.38% boost possible after the next rate cut could be worth as much as $1,976,910.

He warned anyone with the budget to buy today off waiting for a rate cut if they were keen on a “competitive suburb”.

“I can’t talk for all suburbs, but absolutely don’t wait for areas that are always going to be desirable,” Mr Corney said.

Noel Jones Doncaster’s Daniel D’Assisi said Victoria’s top-performing areas were “upsizing areas” where families looked for bigger home or to get their kids into popular school zones.

“And when there’s an interest-rate cut, that’s when families take the leap,” Mr D’Assisi said.

While he said a single 0.25 percentage point rate cut might not be enough to spark a home price surge in the space of a month, a 0.5 percentage point decrease could be enough — as could a scenario where buyers had confidence there would be back-to-back drops.

However, Mr D’Assisi said the big factor would be the increased borrowing capacity — which would account for as much as 60 per cent of any price rises after a cut.

23 Owens Ave, Glen Waverley, changed hands for $1.65m recently, but could be worth as much as $1,672,275 when the Reserve Bank next makes a tweak to the cash rate.

Victoria’s Top Areas For Post-Rate Cut Growth

AREA	POTENTIAL GROWTH $	POTENTIAL GROWTH %
Doncaster East – North	$23,322	1.4%
Doncaster East – South	$21,454	1.4%
Templestowe Lower	$20,299	1.4%
Glen Waverley – East	$22,867	1.3%
Vermont South	$19,961	1.3%
Vermont	$16,586	1.3%
Wheelers Hill	$20,105	1.3%
Doncaster	$20,908	1.3%
Wantirna South	$16,402	1.3%
Blackburn South	$17,839	1.3%
Bentleigh East – North	$20,243	1.3%
Nunawading	$15,990	1.3%
Mount Waverley – North	$22,075	1.3%
Keysborough – South	$14,840	1.3%
Wantirna	$14,834	1.3%
Thornbury	$18,557	1.3%
Templestowe	$22,813	1.3%
Burwood East	$16,798	1.3%
Ashwood – Chadstone	$18,093	1.3%