The History of Property Prices Following Interest Rate Cuts – 40 Years of Data, Houses vs Units, Capitals vs Regions & Predictions (Ep. 313)

Show Notes – What Happens to Property Prices After Interest Rate Cuts?

Is Australia on the brink of another property boom? In this episode, Cate, Dave, and Mike unpack the key economic indicators driving the market, starting with the burning question: What do interest rate cuts mean for property prices?

With fresh insights from economist Peter Munckton of BOQ, and decades of housing data to back them up, the Trio explore how interest rate cuts historically ignite property price growth and why 2025 could be the smart investor’s moment to act before an expected surge in 2026.

1. The Domino Effect of an Interest Rate Cut

• Research shows property prices typically rise quickly after the first interest rate cut in a new cycle.
• In 8 of the last 10 cycles, national property prices increased more than 10% within two years.
• Dave breaks down how interest rate cuts are already boosting borrowing power, with potential increases of $40,000 to $70,000 per buyer.

2. Demand Rising While Supply Stalls

• Only 180,000 dwellings were approved in the year to March 2025, far below the government’s target of 1.2 million new homes by 2029.
• Supply shortfalls, combined with interest rate cuts, are creating the perfect storm for property prices to rise.

3. First Home Buyers Surge with Expanded Support

• The First Home Guarantee has been turbocharged, raising income caps and annual quotas.
• This surge in buyer activity is expected to contribute to further increases in property prices.

4. Capital Cities Poised for Rebound

• Melbourne, Hobart, Darwin and Canberra are showing signs of renewed momentum in property prices.
• Dave predicts 2026 as the peak growth year, with 2025 serving as the platform, especially after the recent interest rate cuts.
• Key factors: lower prices relative to long-term averages, improved yields, and early signs of rental growth.

Source: Cotality (formerly CoreLogic)

5. Houses vs Units: The Price Gap Widens

• Since 2020, house prices have surged 60%, compared to 30% for units.
• With houses now around 30% more expensive, will affordability pressures drive buyers back to units?
• The Trio explore whether unit property prices are due for a catch-up.

6. Regional vs Capital: A Market Shift Underway

• Post-pandemic, regional property prices grew 74%, outperforming capital cities at 44%.
• Now, the price gap is narrowing: capital city property prices are just 35% higher than the regions, compared to a historic 60%.
• Based on cyclical patterns, a capital city resurgence in property prices may be on the horizon.

7. Mid-Year Forecasts: Are We On Track?

• Dave updates his prediction: 4.5% national growth for 2025, up from his original 3–6% forecast.
• Cate sees 6–9% national growth, especially if further interest rate cuts occur.
• Mike maintains a conservative view: 3–4.9%, noting the slowdown in Perth, Brisbane and Adelaide.
• All agree that the groundwork laid by the current interest rate cut cycle is likely to boost property prices.

Gold Nuggets

David Johnston’s gold nugget: 2025 is shaping up as a better window of opportunity. Borrowing power has improved… but Dave believes 2026 could be an even stronger year for property price growth.

Mike Mortlock’s gold nugget: Are we heading towards a boom? Mike steps through the other capitals and he tends to agree with Dave.

Cate Bakos’s gold nugget: Cate focuses on the history of booms and busts and talks about the historical magnitude of each. Standing back and looking longer term, long-term active investors will have a different level of sensitivity about market movement.