Australia’s housing market is shifting rapidly in response to recent rate cuts. With two reductions to the official cash rate already delivered in 2025, the country has officially entered its first cycle of rate cuts in four years. While this monetary easing boosts borrowing power, it also presents new challenges — most notably, rising property prices.
Recent data shows that this period of rate cuts is creating both opportunity and affordability pressure for Australians hoping to buy or upgrade homes. As the cost of borrowing drops, competition in the housing market is heating up — and so are the prices.
The House Price Climb Continues
All eight capital cities recorded house price increases in the June quarter, a milestone not seen in years. Sydney, Brisbane, Adelaide, and Perth reached record highs, while Melbourne and Hobart posted their strongest results in some time.
Sydney’s median house price, for example, rose 2.6% to a new record of $1.7 million. Melbourne followed with a 2.3% increase, reaching $1.06 million. Much of this price growth is being driven by increased borrowing capacity — a direct effect of the recent rate cuts.
The influence of rate cuts extends beyond houses. Apartment prices have also surged, with affordability concerns pushing more buyers toward units. Domain’s latest data showed that national unit prices climbed to a new high of $689,588 — the strongest quarterly growth in two years. Cities like Brisbane and Adelaide are seeing extended runs of unit price growth, while Darwin and Canberra led the nation in recent quarterly gains.
However, the biggest issue remains supply. Nicola Powell, Chief of Research at Domain, warned that price pressures will continue unless there is a substantial increase in housing stock — regardless of how many rate cuts are implemented.
Upsizers Take Advantage of Rate Cuts
Despite challenges, mortgage brokers are reporting a noticeable shift. Rate cuts are giving many homebuyers the confidence — and borrowing capacity — to consider upsizing. Families who may have previously been priced out of larger homes are now actively exploring their options.
Brett Sutton, a broker at Two Red Shoes, noted an increase in demand from young families wanting more space. Many had initially bought apartments or townhouses and are now using the opportunity created by the rate cuts to move into bigger homes. He described the current market as a “window of opportunity” that could close within the next six months as prices catch up.
Even amid global economic uncertainty, the current cycle of rate cuts appears to be restoring buyer confidence. While many remain cautious, the Reserve Bank’s direction is giving people the reassurance they need to act.
Still, affordability challenges linger in high-cost cities like Sydney. Sutton pointed out that growth in Sydney is limited not by interest in buying but by how much people can actually borrow. In his view, any further price movement will likely depend on whether additional rate cuts increase borrowing power even more.
A Market in Motion
Whether it’s first-home buyers, growing families, or investors, rate cuts are reshaping the Australian property landscape in real time. They’re making borrowing easier but also driving prices higher — creating both opportunity and urgency.
Thinking of making a move? Now could be the time to explore your options while rates are low. Reach out today for a personalised review of your borrowing capacity and take the next step toward your property goals.