As inflation stabilizes and economic conditions evolve, the question on everyone’s mind is whether interest rates, including those impacting Real Estate Australia (REA), will rise or drop in the coming months.
For the first time since 2021, headline inflation has stayed within the Reserve Bank of Australia’s (RBA) target range of 2-3% for more than three months. According to the Australian Bureau of Statistics (ABS), consumer prices rose 2.3% in the year to November, a slight increase from October’s 2.1%. Encouragingly, the RBA’s trimmed mean, which excludes volatile price changes, dropped from 3.5% in October to 3.2% in November.
Despite these positive developments, the RBA maintains that more consistent and sustained progress is necessary before considering rate cuts.
What Does This Mean for REA Rates?
High interest rates have already impacted household budgets and property prices. Anne Flaherty, senior economist at REA Group, noted that current economic pressures are slowing housing price growth.
“Interest rates have been elevated for a prolonged period, which has dampened market activity,” Ms. Flaherty said. “Cost-of-living pressures remain high, and while inflation has eased, wage growth has also slowed, further straining budgets.”
According to PropTrack data, house prices fell nationwide last month for the first time in two years. Oxford Economics Australia (OEA) predicts that rates will stay in restrictive territory for the foreseeable future, contributing to continued challenges for homeowners and buyers alike.
Government and RBA Perspectives
Treasurer Jim Chalmers acknowledged that, while inflation data shows progress, many Australians are still feeling financial strain. “The government remains focused on reducing the cost of living, but it’s important to recognize that economic improvements don’t always immediately translate into relief for households,” he said.
The RBA has expressed cautious optimism about managing inflation but emphasized the importance of maintaining stability. “While there has been substantial progress, we need sustained evidence of inflation consistently within the target range before considering rate cuts,” the RBA stated in its recent communications.
The Road Ahead for REA Rates
While the possibility of a near-term rate cut remains slim, Ms. Flaherty is cautiously optimistic about the first half of 2025. “If inflation continues to move in the right direction, there’s a chance we could see rate cuts later this year,” she explained. “However, underlying inflation remains above the RBA’s target, and that will delay any immediate changes.”
For now, REA rates are likely to remain steady as policymakers balance inflation control with economic growth. Homeowners and prospective buyers should prepare for continued uncertainty but can remain hopeful for potential relief later in 2025.
