This week’s property market insights reveal a mix of rate relief, market resilience, and policy shifts. The much-anticipated 0.25% interest rate cut has landed, but strong jobs data suggests further cuts may be slow to follow. Meanwhile, distressed sales remain remarkably low, with homeowners adapting rather than offloading properties despite higher mortgage costs. On the policy front, the government’s foreign homebuyer ban is facing criticism for loopholes that could limit its impact.

Historic Rate Cut Lands, But More May Be a While Away

This week, the Reserve Bank of Australia (RBA) delivered the much-anticipated 0.25% interest rate cut, the first in four years. While borrowers welcomed the decision, hopes for further cuts in the near future are fading as strong jobs data suggests the economy remains resilient.

Key Takeaways:

• First Rate Cut in Four Years: The RBA reduced rates by 0.25%, citing easing inflation and the need to prevent an economic slowdown.
• Jobs Market Strengthens: Australia added 54,000 new full-time jobs in January, bringing the yearly total to 500,000 new roles.
• Unemployment Ticks Up Slightly: The jobless rate rose to 4.1%, but this was largely due to an increase in people waiting to start work as opposed to businesses not hiring.
• Wage Growth Slows: Despite job market strength, annual wage growth fell from 4.2% to 3.2%, reducing inflationary pressure.

What This Means for Interest Rates & Property

Despite the rate cut, the RBA is in no rush to lower rates further, as Governor Michele Bullock warned that the tight labour market could sustain inflationary pressure. While inflation is easing, strong job creation could slow the disinflation process, delaying further rate relief.

How Homeowners Navigated the High-Rate Era Without Forced Sales

Despite the sharp rise in interest rates over the past two years, Australian homeowners have largely avoided a surge in forced sales, with distressed property listings remaining low compared to historical levels. While some states have seen a modest increase in stress sales, the feared wave of mortgage defaults never materialized.

Key Takeaways:

• Distressed Listings Remain Low: Nationally, distressed property listings rose by just 1.6% in January to 4,782, still 8.9% lower than a year ago and among the lowest on record.
• NSW: Distressed sales rose 1.9% in January (to 1,201 listings) but are still 8.7% lower than last year.
• Victoria: Listings rose 1% monthly and 14.5% annually, reflecting some pressure.
• Queensland & WA: Distressed sales continue to decline, with QLD down 19.8% and WA down 22.3% year-on-year.

Why Haven’t We Seen a Wave of Mortgage Defaults?

1. Strong Employment Market – With unemployment still low at 4.1%, most borrowers have been able to keep up with repayments.
2. Bank Flexibility – Lenders have been proactive in helping borrowers adjust loans rather than pushing them into foreclosure.
3. Rising House Prices – While property values dipped slightly, most markets have remained resilient, allowing homeowners to sell at a reasonable price if needed.
4. Tighter Lending Controls – Since 2021, banks have required borrowers to pass a serviceability buffer, ensuring they could handle rates 3% higher than their loan at approval.

What This Means for the Property Market

• No Flood of Cheap Listings – With distressed sales well below 2020 levels, there is no sign of a forced-seller market driving down prices.
• Buyers Shouldn’t Expect significant discounts – While some pockets, like Victoria, have seen rising distress listings, competition remains strong in many markets.
• Households Have Cut Back, Not Sold Up- Instead of selling homes, many Australians have adjusted their spending on luxury goods, cars, and household items to manage mortgage repayments.

AMP’s Shane Oliver summed it up: “The market looks stable for now, but of course, things are OK until they’re not.” For now, homeowners have weathered the storm, but as economic conditions shift, we’ll be watching to see if this resilience holds.

Strategic Play: Piggy Backing Off Premium Suburbs

Flippers are seeing strong returns in this market by targeting more budget friendly pockets within premium suburbs to gain access to desirable locations without the huge price point. This strategy involves identifying adjacent or nearby areas that offer similar amenities and lifestyle benefits at a fraction of the cost.

Case Study: Herne Hill vs. Manifold Heights

For example, in Victoria, buyers are turning their attention to Herne Hill, a suburb offering more budget-friendly options compared to its pricier neighbour, Manifold Heights.

• Herne Hill: The median house price stands at approximately 684,000, reflecting a 4.3% decrease from the previous year.
• Manifold Heights: In contrast, this suburb has experienced a 13% increase in median house prices, now at 1.27 mil.

Herne Hill buyers get to tap into all the upside of the location at almost half the cost! Recent auctions in Herne Hill have seen competitive bidding, with properties selling well above initial expectations.

Beyond Victoria, other states offer similar opportunities.

• Queensland: Suburbs like Russell Island offer median house prices around 380,942, providing affordable options within reach of Brisbane.
• South Australia: Areas such as Elizabeth North have median house prices at 441,500, making them some of the most affordable in the region. For those looking to capitalize on these opportunities,

consider the following strategies:

• Research Adjacent Suburbs: Identify areas with nearby premium suburbs that offer similar amenities and lifestyle benefits at more budget-friendly alternatives.
• Monitor Market Trends: Stay informed about market fluctuations, as some suburbs may experience price adjustments making them more accessible.

Two Year Ban On Foreign Investors

The Australian government’s recent announcement of a two-year ban on foreign investors purchasing existing homes, set to commence on April 1, 2025, has sparked debate among industry experts. While the policy aims to address housing affordability and availability, critics argue that it may be ineffective due to significant loopholes and could potentially overlook the primary factors contributing to the housing crisis.

Key Concerns Raised:

1. Impact of Migration vs. Foreign Investment: Experts highlight that the surge in housing demand is more closely linked to high immigration rates rather than foreign investment. Research fellow Saxon Davidson points out that over 1,000 net new migrants arrive in Australia daily, exacerbating housing shortages.

2. Loopholes in the Ban: The ban primarily targets offshore investors, but a significant portion of foreign homebuyers are migrants seeking residence in Australia. Peter Li, general manager of Plus Agency, notes that many foreign buyers are migrants becoming Australian residents, purchasing homes to live in, which the ban does not effectively address.

3. Minimal Impact on Housing Supply: Foreign investors account for a small fraction of the housing market. Daniel Ho, co-founder of Juwai IQI, estimates that the ban would impact fewer than 1,600 property transactions annually, a negligible effect in a market with over 520,000 home sales per year.

4. Potential Negative Effects on New Developments: Foreign investment has historically played a role in funding new housing projects. Restricting foreign buyers might limit the construction of new homes, as developers often rely on foreign capital to initiate projects.

In summary, while the government’s ban on foreign purchases of existing homes aims to alleviate housing pressures, experts suggest that addressing immigration rates and ensuring adequate housing supply are more critical factors in resolving Australia’s housing affordability crisis. With the market holding steady despite economic shifts, savvy buyers and investors should focus on strategy over speculation. As interest rates adjust, distressed sales stay low, and policy changes unfold, staying informed is key to making smart moves in real estate.

Important: Find renovation property deals to flip for profit using potentially none of your own money with commercial funding (new funding available), Our research tool helps you find profitable deals to flip with 20% profit so you qualify for commercial finance (newly available for renovation deals).

Access FastProperty.AI for free. No credit card required..

Click here to get access