House prices rose 0.3% in February after interest rate cuts, with Melbourne showing significant gains amid affordability issues.

In Short

House prices in Australia have rebounded following an interest rate cut, with notable gains in Melbourne and Hobart, although rental growth has slowed. Despite increased buyer competition and challenges for first-time buyers, analysts do not anticipate a significant housing boom, as further rate cuts would be necessary to stimulate the market.

House prices have shown a rebound following an interest rate cut by the Reserve Bank of Australia.

CoreLogic reported a 0.3 per cent national rise in property values for February, signalling a recovery from a brief decline. Melbourne and Hobart experienced notable gains, while rental growth slowed to 4.1 per cent over the year, marking the smallest annual increase in years.

Experts suggest that lower interest rates enable buyers to secure larger loans, thus driving up housing prices. The recent rate cut has improved market sentiment, preventing a potential decline in property values that was anticipated due to affordability issues.

Rising prices

Homebuyers, however, are facing challenges; lower rates often correlate with rising prices, creating a catch-22 scenario. Some individuals, like first-time buyers, express frustration with being outbid at auctions due to increased competition.

While the current cash rate stands at 4.1 per cent, analysts do not expect a significant housing boom despite the rebound. Economists indicate that substantial further rate cuts would be needed to ignite growth in Australia’s high-priced markets.

In Victoria, home prices remain affordable relative to income growth, drawing first home buyers. The state has experienced slower price increases than others, influenced by increased housing supply and recent regulatory changes affecting investors.