Compare the Market’s property expert Andrew Winter warns that buyer’s trying to “time” the property market could end up getting burned. 

Could Australia’s property market get any hotter? Well, if, as some buyers seem to think, a rate cut is on the cards next year we are likely to find out. 

The idea alone is fuelling hysteria among buyers who flooded the market to see if they can ride the next wave of equity growth.

Nearly 10,000 first-home buyers secured a property in July, up 12.8% on the previous year. On average they were also taking out bigger loans, with the value of commitments up compared to July 2023. 

It isn’t easy being a first-time buyer as it is. 

A recent Compare the Market survey of aspiring homeowners found that 62% did not have a big enough deposit to realise their homeownership dreams, while 39% said their savings were getting outpaced by rising prices. 

Now, many believe their window of opportunity is about to close, if rates drop as some predict early next year. 

Because lower rates mean “cheaper money” – that’s money that is cheaper to borrow – we could see even more buyers brought into the fold, forcing prices up further. 

So, is this really the last chance buyers have to get in before prices skyrocket

Future of cash rate remains uncertain

At the September board meeting, RBA Governor Michele Bullock dumped cold water on speculation of rate cut before the end of this year. 

But many economists, including those from ANZ and Westpac believe we could still see a cut as early as February 2025. 

According to the Financial Review’s quarterly survey, the median forecaster predicts the cash rate will fall to 4.1 per cent at the RBA’s first meeting of 2025, from 4.35 per cent today, to 3.35 per cent by the time policy is sufficiently loose.

As much as the Reserve Bank of Australia (RBA) might be tempted to lower interest rates, they need to tread carefully. 

Australia has a long history of property booms following interest rate cuts. While this may be great news for property investors, it risks shutting the door on young Australians struggling to get a foot in the door.

The property market is already super hot. And it’s not just first buyers jostling for a slice of the pie. In May alone, new home loan commitments to property investors rose by 2.7% to a staggering $11 billion—the highest figure since March 2022. 

Investor loans (excluding refinancing) climbed nearly 18% in the 2023-24 financial year, totalling $117.9 billion. 

Is now a good time to buy? 

Buying now could allow you to build equity if prices rise, improving your Loan-to-Value Ratio (LVR) and potentially securing a lower interest rate in a few years’ time. 

That said, don’t expect the bank to automatically drop your rate just because your LVR has improved. You’ll likely need to negotiate that discount yourself. Stay vigilant and always compare your interest rate against the market to ensure it remains competitive.

While we can never be sure what will happen to property prices in the short-term, I think what’s clear is that we have a bit of a problem on our hands. 

A rate cut, if it happens, compounded by Australia’s ongoing housing shortage, threatens to supercharge price growth, closing the window of opportunity for many prospective buyers.

I’m not usually a fan of trying to time the market but if you’ve managed to save a deposit, you’re confident you can meet repayments, and you’ve found a property that suits your needs and budget, it could be worth thinking about taking the plunge. 

For more information, please contact: 

Natasha Innes | 0416 705 514 | [email protected]

Compare the Market is a comparison service that takes the hard work out of shopping around. We make it Simples for Australians to quickly and easily compare and buy insurance, energy, travel and personal finance products from a range of providers. Our easy-to-use comparison tool helps you look for a range of products that may suit your needs and benefit your back pocket.