Australia’s housing market could be on the cusp of a turning point as the Reserve Bank of Australia’s July rate hold sets the stage for renewed activity in the critical spring selling season.
According to Domain’s Chief of Research, Dr Nicola Powell, the central bank’s decision to pause the cash rate has added a layer of stability that may be just enough to restore confidence among both buyers and seller, particularly in Sydney and Melbourne.
“The hold was a surprise, but I think we’re going to get one in August,” Dr Powell said.
“And that really sets the scene for a better spring, particularly for sellers.”
While the pause caught some market participants off guard, Dr Powell believes the RBA’s restraint reflects a broader strategy to manage expectations and avoid triggering a runaway recovery in overheated markets.
“If we’d seen two back-to-back rate reductions, that could have created even more momentum,” she said.
“We’ve already seen just two cuts bring more inquiries, bring those fence-sitters back to market, and bring a bit more momentum into our housing markets.”
She added that the cautious approach is likely deliberate, with the RBA waiting on key indicators before committing to further easing.
“They’re waiting on quarterly inflation, job numbers… but I do think the August decision will be enough to provide confidence heading into spring.”
Spring, traditionally the busiest time of year for residential transactions, is especially sensitive to monetary signals.
“Spring is the peak season for buying and selling property. We see higher levels of supply, and at the same time more buyers come to market,” she said.
“Your decision to buy and sell doesn’t change … it just gets delayed by decisions such as movements in the cash rate.”
While the broader market has remained relatively subdued through winter, early indicators point to renewed interest in Australia’s largest capital cities.
“Markets like Sydney and Melbourne react quicker to reductions in the cash rate – and hikes too. That’s because households are more indebted in these expensive capital cities,” Dr Powell said.
“It aligns with our forecast. We’re expecting Melbourne to go into a turnaround and into a recovery. And we’re expecting Sydney to lead price growth over this financial year.”
She also sees growing momentum in the prestige market, which she says often leads recoveries.
“The prestige segment of the market leads price recoveries,” she said. “Even during market downturns, we see them perform well. Once you get over that $4–5 million mark, the cash rate doesn’t really influence buyer decisions.”
Although overseas buyers do play a role in this segment, she notes that domestic demand remains robust: “Localised buyers are seeing the value and thinking, ‘I need to move now before prices rise even further.’”
In the rental market, Powell noted a strong resurgence of demand for units, particularly in inner-city locations. “We are seeing stronger rates of growth for unit rents versus house rents,” she said. “That says a lot about affordability but also where the demand pressures are … units are concentrated in inner-city locations.”
She believes this reflects a return to city life, especially among renters responding to return-to-office policies. “We’ve probably seen a move back in the rental space. With return to office, even in a hybrid way, commutability is an important factor when deciding where to live.”
Post-COVID regional migration, which dominated headlines through 2021 and 2022, has largely stabilised, and while the trend continues in some form, it’s now returning to its historical baseline.
“Sydney’s price point is pushing young families into regional markets,” she added. “But that’s always happened. The pandemic just sped it up.”
Looking ahead, Dr Powell expects the more affordable end of the market, particularly units, to show stronger price growth in the near term and she also sees a growing divergence between buyer types, particularly between owner-occupiers and investors.
“Owner-occupier grade units will perform better than investor-grade ones,” she said. “There’s still a wide gap between prices and the capacity to pay for a home. That’s going to limit growth in some areas.”
Despite persistent affordability challenges, Dr Powell said the market outlook for the second half of 2025 remains steady, albeit varied.
“We’re moving from affordability-driven growth back to our major cities – Sydney and Melbourne,” she said.
“Sydney’s going to be the kingpin again.”
While cities like Adelaide and Perth may still see growth, she expects the pace to ease.
“Our forecasts are nowhere near double-digit growth,” she said. “But we are seeing momentum building, and we’re shifting into a more traditional market cycle.”
When asked to describe the current state of the market in a single word, Dr Powell responded without hesitation: “Diverging,” she said.
“Buyers are reacting to rate reductions, and even property types are behaving differently. It’s about knowing your local market – they’re diverging in different ways.”
