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RBA rate cut sparks market optimism: Lessons from history and why waiting could cost you

The Reserve Bank of Australia’s recent interest rate cut has injected new optimism into the property market. Lower interest rates mean cheaper mortgages and higher borrowing capacity for buyers – a recipe that has historically led to surging house prices. In this expanded analysis, we’ll explore historical examples of rate cuts and their impact on prices, the role of government incentives like the First Home Guarantee, and how Labor’s latest housing policies could further fuel demand. By the end, one thing should be clear: delaying your purchase might prove costly if prices climb as forecast.

Historical rate cuts and property price booms

When interest rates drop, property markets often heat up. This isn’t just theory – recent history provides clear examples of how rate cuts have translated into rapid price growth across Australia, both nationally and in key states.

Post-GFC recovery (2008–2009)

During the Global Financial Crisis, the RBA slashed the cash rate from 7.25% in March 2008 to just 3.0% by April 2009. This drastic easing helped Australia avoid the worst of the housing downturn that hit other countries. In 2008, home values dipped only modestly (around –3% nationally), and then quickly rebounded as lower rates kicked in.

By late 2009, housing prices were soaring again. Official figures showed capital city house prices jumped 4.2% in just the September quarter of 2009. Melbourne led the charge – its median house price was already 6.1% higher by May 2009 (just five months into the year). Sydney wasn’t far behind with a 5.2% increase over the same period. Other markets followed suit: by the end of 2009, national house values had not only recovered their GFC-era losses but climbed to new highs. In fact, across the eight capital cities, prices rose by an estimated 13% in 2009 alone, thanks to the combo of rate cuts and stimulus for first-home buyers.

Crucially, this post-GFC boom was felt around the country. Victoria (VIC) saw particularly strong growth led by Melbourne, while New South Wales (NSW) (Sydney) also rebounded solidly. Queensland (QLD) and South Australia (SA) experienced more moderate early gains in 2009 (e.g. Adelaide’s prices were up ~0.5% by mid-2009) but gathered momentum into 2010. Western Australia (WA) was a slight laggard initially – Perth values were still finding a floor in early 2009 – yet even Perth turned around as the broader economic recovery took hold. The lesson from 2009 is clear: when the RBA opens the rate tap, property markets across all states tend to lift, with previously sluggish markets often catching up fast as buyer confidence returns.

Pandemic era boom (2020–2021)

Flash forward a decade to 2020, and Australia faced another crisis – the COVID-19 pandemic. The RBA responded by cutting rates to record lows (eventually just 0.1% by late 2020) and injecting liquidity. The result: one of the strongest housing market booms on record.

After an initial wobble (home values slipped a few percent in early 2020), the property market took off dramatically. National home values rose about 38% from the start of the pandemic through early 2025. A huge chunk of that growth came in 2020–2021 after the rate cuts. To put it in perspective, Australian dwelling prices climbed ~23.7% in just the 12 months to Dec 2021 – the fastest annual growth in decades. Every state got a piece of the action:

  • New South Wales (Sydney): Prices soared ~26.7% year-on-year in 2021, despite intermittent lockdowns. Cheap credit and a surge of buyers saw Sydney hit record highs.
  • Victoria (Melbourne): Values were up about 20% year-on-year by end of 2021. Melbourne’s growth was a bit lower than Sydney’s (partly due to extended lockdown impacts), but still extremely rapid.
  • Queensland (Brisbane): A standout performer – +27.8% year-on-year. In fact, Brisbane led major markets, fueled by an influx of people relocating for lifestyle and affordability.
  • South Australia (Adelaide): +23.9% year-on-year, right in line with the national average. Adelaide went from steady-and-slow to suddenly booming, as low rates enabled more buyers to enter the market.
  • Western Australia (Perth): +15.7% year-on-year growth – strong, though not as explosive as the eastern states. Perth’s market was recovering from a longer downturn, but record-low rates finally gave it a boost.

These gains weren’t just a one-year blip. Many cities continued rising into 2022. Overall, from March 2020 to March 2024, national home prices jumped roughly 40%. Certain regions saw even bigger moves – regional areas skyrocketed by ~54% over the pandemic period remote work and lifestyle changes drew buyers away from capitals. Even the combined capital cities rose ~33-34% in that timeframe.

The COVID-era housing boom confirmed once again that interest rate cuts are rocket fuel for property prices. Abundant credit and lower monthly repayments enabled buyers to bid up prices across Australia. Anyone who bought property in 2020 was sitting on significant equity gains by 2021–2022. Conversely, those who hesitated found themselves chasing a rapidly moving target as prices ran away.

First Home Guarantee: Low deposits, high demand

Apart from low interest rates, government incentives can also turbocharge buyer demand. A prime example is the First Home Guarantee (FHBG) program. This scheme (previously known as the First Home Loan Deposit Scheme) allows eligible first-home buyers to purchase a property with as little as 5% deposit, without paying Lenders’ Mortgage Insurance (LMI). In practical terms, the government acts as a guarantor for up to 15% of the loan, so first-time buyers can borrow 95% of the property’s value while avoiding the extra cost of LMI.

Why does this matter? Because the traditional 20% deposit hurdle is a big barrier to entry, and this scheme dramatically lowers that barrier. With FHBG:

  • Buy sooner with a small deposit: Instead of spending years saving $100,000 for a 20% deposit on a $500k home, a first-home buyer could buy with just $25,000 (5%).
  • No LMI expense: Normally, loans above 80% of the property value incur LMI premiums (often running into tens of thousands of dollars). Under FHBG, that cost is waived, making the purchase more affordable upfront.
  • 35,000 places per year to unlimited spaces per year: The scheme had a limited number of slots each year (recently expanded 35,000), and it’s popular – meaning tens of thousands of extra buyers in the market who otherwise might still be saving up.

The likely impact on housing demand and prices is significant. By enabling more people to buy with lower deposits, the FHBG effectively pulls forward demand – buyers who might have waited longer can enter the market now. This increased competition, especially for entry-level properties (think starter homes, units, outer suburbs), tends to push prices up in that segment. Even property experts acknowledge this effect. CoreLogic’s Head of Research, Eliza Owen, noted that while the deposit schemes improve buyer accessibility, they won’t put downward pressure on prices. In fact, she observed that the scheme could “drive up prices at the low end of the market due to the ability of more people to participate in home purchases.”. In other words, making it easier for first-home buyers to buy increases competition for affordable homes, which can prop up or even raise prices in those tiers.

It’s a classic case of good intentions having a side effect: FHBG helps young buyers get a foot on the ladder, but collectively it also boosts demand in a housing market that’s already supply-constrained. For a property investor or existing owner, this extra demand can be seen as a positive force supporting values. For a first-home buyer, it means acting sooner rather than later could be wise – the longer you wait, the more fellow buyers you might be up against as new incentives roll out.

Labor’s new housing policies: More fuel for the fire

Government policy remains a key factor shaping housing demand. In the most recent federal election, the Labor party proposed a major housing policy aimed at helping buyers – and it has implications for the property market at large. The flagship proposal was Labor’s “Help to Buy” shared equity scheme, a program designed to help more Australians purchase homes by having the government co-invest in the property.

Under Help to Buy, eligible homebuyers (who meet income criteria of up to $90k for singles or $120k for couples) would need only a small deposit (as low as 2% in some cases) to purchase a home. The government would contribute up to 40% of the price for new homes (or 30% for existing homes), taking that equity stake in the property. For the buyer, this means a much smaller mortgage and no LMI – effectively, it dramatically lowers the upfront and ongoing costs of buying. Labor pledged 10,000 places per year for this scheme.

If implemented, how could this affect the market? Essentially, Help to Buy directly adds more buyers with greater purchasing power. Those 10,000 households a year are able to enter the market or buy a higher-priced home than they otherwise could, because the government is footing a large chunk of the bill. This injects additional demand, particularly in the price brackets covered by the scheme’s regional price caps. By lowering the effective price for these buyers, it likely encourages them to buy sooner and compete for properties they might not have pursued at full price.

Even critics of the scheme acknowledge the demand boost. The Greens (who have been critical of Help to Buy on affordability grounds) pointed out that it could “push up the price of housing, even marginally” for everyone else. Their reasoning is that only a small fraction of renters can benefit directly (0.2% of renters each year), while the added competition affects the broader market. In other words, for the 99.8% of buyers not in the scheme, prices could edge higher due to the extra demand.

From a market growth perspective, Labor’s Help to Buy (along with other policies like expanded regional buyer guarantees and commitments to boost housing supply) signals that housing will remain a national priority. In the short term, shared equity is effectively another form of stimulus on the demand side. It complements the low interest rate environment by helping more people leverage those low rates. More buyers + cheaper credit = upward pressure on prices, all else being equal. For investors and homeowners, these policies can be seen as further support for the market. For prospective buyers, it underscores that waiting might only introduce new competition or higher prices – because the government is actively trying to bring more buyers into the fold.

Why delaying your purchase could be costly

With interest rates down, buyer incentives up, and confidence returning, the consensus among many economists and property watchers is that Australian home prices are poised to keep rising in the coming years. If you’re in a position to buy now, there’s a persuasive case to act sooner rather than later. Here’s why:

  • Forecasts point to growth: Several major forecasts anticipate solid price growth ahead. For example, Westpac’s economists expect national house prices to rise about 6% in 2024 and another ~4% in 2025. KPMG’s outlook is similar, projecting ~5% per year increases. Domain’s latest Property Price Forecasts for FY2025 predict a 4–6% rise nationally in 2025. These are conservative averages – certain markets are predicted to outperform even more. Westpac sees Perth climbing ~14% in 2024 and Brisbane about 10% in 2024, with continued (if slightly slower) growth into 2025. Even Sydney and Melbourne, which had smaller gains recently, are expected to keep trending up (in the low-to-mid single digits). The overall message from the banks and analysts: the price trajectory is upwards over the next couple of years, not flat or down.
  • Recent momentum is strong: It’s worth noting that despite the rate hikes of 2022, the market found a floor and started rising again in 2023. In fact, house prices actually rose about 10% in 2023 nationally as buyers adjusted to higher rates. By 2024, as rate pressures eased, some cities saw double-digit surges – **Brisbane, for instance, surged 12.1% in 2024 alone. This momentum heading into 2025, combined with the fresh rate cut, suggests the market has already shifted back into growth mode. If the RBA continues to ease rates gradually, it could further accelerate this upswing.
  • Undersupply and population growth: Beyond rates and policies, the fundamentals of supply and demand are bullish for prices. Australia faces a well-documented housing shortage. Construction of new dwellings has not kept pace with population growth, and building approvals remain low. At the same time, overseas migration has returned, adding more demand for housing. Strong population increases in Queensland and other states are fueling housing needs. When demand outstrips supply, prices tend to rise. The RBA itself has noted that if we don’t build enough during these periods of low rates, we’ll likely just end up with “higher prices and not many more dwellings”. In short, the supply crunch puts a floor under prices – and when you add lower interest rates (which stimulate demand), it’s a recipe for significant price growth unless a lot of new homes appear quickly.
  • Cost of waiting example: Let’s put the numbers into perspective. Suppose you’re eyeing a house today priced at $600,000. If prices nationally go up, say, 6% over the next year (in line with forecasts), that same house could cost ~$636,000 next year. A $36,000 increase in one year can easily outpace what you might save by waiting, especially since your savings account won’t grow that fast. In markets like Brisbane or Perth where a 10%+ yearly rise is possible, a $600k home could be $60,000+ more expensive in a year’s time. Even on a $500,000 apartment, a 5% rise adds $25k to the price tag. The risk is that by delaying, you end up paying more for the same asset, effectively punishing those who sit on the sidelines.
  • Incentives and conditions are favourable now: Lastly, consider the unique alignment of factors currently in play. Interest rates have just been cut, improving affordability for borrowers. Government schemes (FHBG, Help to Buy, etc.) are available to give buyers a leg-up right now – there’s no guarantee these incentives will be as generous or widely available in the future. And importantly, you’re competing in a market that, while heating up, is still not as frenzied as it could become if another year of double-digit growth expectations sets in. Early 2020 taught us that when sentiment shifts positively, buyers can flood back in quickly, and prices can gap up in a matter of months. By being ahead of the curve, you position yourself to ride the wave of growth rather than chase it.

Bottom line: If you have the capacity to buy in the current environment, the prevailing wisdom (backed by historical precedent and current forecasts) is that acting sooner will likely save you money. As one property observer quipped, “Things can only improve from here” – meaning improve for sellers and owners, that is. For buyers, “improvement” in the market translates to higher prices down the track. Indeed, after the 2008–09 stimulus, one agent noted there could be “one last surge, as buyers rush in” – a scenario that seems to be repeating now in 2025 with renewed rate cuts. The window of softer prices has closed; a new upswing is underway.

Conclusion: Seizing the moment

The convergence of an RBA rate cut, government homebuyer incentives, and an undersupplied market has set the stage for robust property price growth. We’ve seen it before during the GFC recovery and the pandemic boom – when borrowing costs drop and confidence returns, Australian real estate can accelerate quickly across all states (from NSW and VIC to QLD, SA, WA and beyond). Government schemes like the First Home Guarantee and Labor’s Help to Buy are pouring more fuel on the fire by boosting demand, especially at the entry level, which in turn supports overall market strength.

For prospective buyers and investors, the key takeaway is that time in the market beats timing the market. Trying to wait for the “perfect” low price could backfire when all signals point to rising trends ahead. The educational insight from history is that property cycles in Australia have been remarkably resilient – downturns are often shallow and short-lived, while growth periods have delivered significant uplifts in value. Right now, the indicators (low rates, policy support, population growth) are aligned in favor of another upswing.

None of this is to suggest buying property is without risks or that prices never pause or dip. But if you’re financially ready and have done your homework, the current market conditions present an opportunity. The persuasive argument is simple: a delay could mean paying a premium later for the same property you could buy today. As the old saying goes, “The best time to buy was yesterday. The next best time is now.” With experts forecasting solid growth ahead and history showing what happens after rate cuts, now might indeed be the time to take the plunge – before the next wave of buyers and another leg up in prices make it even harder to catch up.

For further insights on property investment, avoiding common pitfalls and staying informed about market conditions. reach out to John Tsoulos or Frank Pennisi at IFP Advisory on (08) 8423 6176. Your investment success depends on making informed, strategic decisions.

IFP Advisory is an Accredited ASPIRE Property Advisor Network advisor and all professionals are Qualified Property Investment Advisors (QPIA). Property investing is about purchasing a property that aligns with your goals and investment strategy. You should never be sold an investment. Know your numbers! If you invest wisely and strategically, the Australian residential property market can be a rewarding venture.

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