The Reserve Bank of Australia’s (RBA) decision to cut the official interest rate by 25 basis points to 4.10% in February 2025 was a welcome boost to household sentiment, and a housing market that has been stalled over recent months under the weight of higher interest rates and other cost of living pressures. While it may ultimately prove to be turning point for housing demand, one cut alone is not likely to fully arrest the current slowdown, particularly when a Federal Election may also keep buyers cautious in the short-term. However, financial markets are currently pricing in at least another two 25 basis point cuts in 2025, which should be enough to significantly lift household confidence and see the market move more clearly into recovery by late 2025. Regardless of whether these further interest rate cuts are delivered or not, and how soon the new housing market cycle gets going, a lower interest rate environment is likely to mean very little further downside risk for Australian dwelling prices and a return to growth over the medium-term.
