The Fin Are house prices about to take off again?
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May 28, 2025 In this engaging discussion, Michael Read, economics correspondent for the Financial Review, shares his insights on the Reserve Bank's recent interest rate cuts and their implications for the housing market. He explains how historical trends suggest that when rates drop, property prices often spike dramatically. Read touches on the anticipated 10-15% increase in housing costs, the challenges faced by first-time buyers, and the impact of global economic changes on local markets. He also reflects on the important role of government support in making housing more affordable.
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Interest Rates Drive House Prices
- When interest rates fall, house prices typically rise, and there is no strong reason this time would be different.
- The Reserve Bank focuses on inflation and employment, not on housing affordability or house prices.
Michael's House Hunting Experience
- Michael Read has been house hunting for nine months while the RBA shifted from raising to cutting interest rates.
- The RBA unexpectedly considered a 50 basis point cut but settled on 25, signaling openness to future rate cuts.
Inflation Controlled Without Job Spike
- Inflation was brought under control without a big rise in unemployment, unlike previous cycles.
- Government hiring in healthcare and education helped balance job losses in the private sector, explaining this unusual outcome.