‘Renewed confidence’: House prices hit record high on interest rate cuts

Australia’s housing market reached a new record high last financial year, but experts say this time will be a little different.

Australia’s housing market soared to a fresh high during the last financial year, with buyers spurred on by interest rate cuts.

National home prices rose 0.4 per cent in June and are now up 4.6 per cent on this time last year, PropTrack figure show.

House prices were up in every market in June, with national house prices on average sitting $40,900 higher than a year prior.

Aussies are taking out bigger loans on the back of RBA rate cuts. Picture: NewsWire / Andrew Henshaw

This was led by capital city growth, with Adelaide posting the strongest monthly rise of 0.6 per cent for the month, extending its streak of outperformance and retaining its title as the strongest performing capital city over the past year (up 9.8 per cent).

Sydney and Hobart were both up 0.5 per cent for the month of June, while Melbourne was up 0.3 per cent, although prices were still 1.1 per cent lower than the city’s record high.

The rise in house prices comes off the back of another interest rate cut in May, the second in the RBA’s rate-cutting cycle.

House prices are on the rise, led by the capital cities. Picture: NewsWire / Flavio Brancaleone

Would-be homebuyers are also factoring further interest rate cuts, with varying forecasts suggesting another three or four rate reductions are coming by early 2026.

REA group senior economist and report author Eleanor Creagh said this rate-cutting cycle could be a little different.

“Market momentum is building amid renewed buyer confidence and improved sentiment, buoyed by falling interest rates and expectations of another rate cut in July,” she said.

“However, the upturn remains measured as affordability constraints keep the pace of growth in check.”

Ms Creagh conceded further house price growth was likely on the back of rate cuts.

“Further interest-rate cuts expected later this year will ease borrowing costs, adding to the

momentum in housing demand and reinforcing recent price growth,” she said.

REA research follows the Reserve Bank governor Michele Bullock being questioned about house prices following the board’s May rate-cut decision.

MReserve Bank governor Michele Bullock says there needs to be more supply to help with rising house prices. Picture: NewsWire / Nikki Short

“If the right thing to do in terms of employment and inflation is to lower interest rates, I think we have to accept what that might imply for housing prices because, as I said earlier, the issue for housing is supply and demand,” she said.

Ms Bullock shifted the blame from interest rates to government policy.

“I guess my personal reflection is that there’s nothing the Reserve Bank can do about these affordability issues of housing,” she said.

“This is an issue of housing demand and housing supply, and increasingly this issue is finding its way into the governments, both state and federal governments, and that’s where the focus has to be.”

The RBA will make its next interest rate decision on July 7-8 when it is widely predicted to reduce interest rates further.

Originally published as ‘Renewed confidence’: House prices hit record high on interest rate cuts