Market Momentum in Uncertain Times
Despite a string of aggressive interest rate hikes by the Reserve Bank of Australia (RBA) over the past 18 months, inflationary pressures, and the ongoing geopolitical instability abroad, Australia’s housing market has continued to defy expectations. Over the May quarter, property prices have risen for the fourth consecutive month, with prestige homes in Sydney and Melbourne setting new benchmark highs.
Negative media sentiment continues to shape buyer psychology, with many still waiting for signs of a major market correction. But on the ground, auction clearance rates are sitting at boom-time levels, open homes are drawing strong crowds, and bidding activity is robust. Still, those holding out for a return to the dizzying price surges of 2021 may need to recalibrate their expectations.
Back in 2021, national median home prices jumped 23.7%—more than double the pace of a typical boom—fueled by ultra-low interest rates and unprecedented borrowing capacity. Today’s higher rate environment has capped that borrowing power. In high-priced markets like Sydney, this is already placing a ceiling on further growth, especially for mid-tier and first-time buyers.
Yet there’s a powerful force counteracting these headwinds: population growth.
Australia is currently experiencing record levels of immigration. While new arrivals traditionally place upward pressure on rental demand, the critical undersupply of rental stock is now pushing many into the purchase market. This demand-side pressure is expected to keep property prices supported well into 2025—even as many homeowners navigate the so-called ‘mortgage cliff,’ which began mid-2023 and saw over 850,000 fixed-rate loans roll over from ~2% to ~6%.
While you’d expect this financial shock to trigger widespread distress, forced sales have remained relatively rare—thanks in part to strong employment, accumulated household savings, and refinancing buffers built during the pandemic.
Looking ahead, holding off on selling in hopes of a more favourable rate environment could be a risky strategy. Stock levels remain low, creating a seller’s advantage—but this could change quickly as we approach the traditional spring selling season. An influx of listings could shift the balance, dampening competition and cooling price momentum.
In short: This is a market that rewards strategy. If you’re buying, selling, or holding, make sure your decision is grounded in the reality of today—not the memory of 2021.
