Login
Rate hold creates a spring window for investors
The RBA’s rate hold gives property investors a clearer runway ahead of spring, but tight borrowing capacity and elevated costs continue to weigh on cash flow as falling prices create selective opportunities.
The Reserve Bank of Australia (RBA) has held the cash rate at 4.35 per cent, offering borrowers a reprieve as stubborn inflation, higher energy costs, and mounting economic uncertainty threaten to weigh further on growth and housing activity.
The board said that financial conditions tightened following three cash rate rises this year, with higher market rates and bond yields starting to curb consumer spending despite continued strength in business debt and investment.
Similarly, they said that the housing market has also lost momentum, with prices falling in some capital cities and new housing loans dropping noticeably as tighter borrowing conditions weigh on demand.
Despite holding tight, the board has not excluded another rate hike for this year, as inflation remains “too high” and isn’t forecast to return to the target range before mid-2027
“The Board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if upside risks materialise.”
According to Compare the Market’s economic director David Koch, the board made “the right decision” by holding the cash rate.
He said that strong employment supported a pause while inflation remains elevated due largely to external pressures and government spending.
“Inflation is going up largely because of the Middle East issue, and because governments are spending and putting demand into the market,” Koch said.
“And then you layer on that, their biggest asset – property prices – are recently starting to come down and there’s a lot of stress out there.
“Average Australians are going into the bunker; their house prices are starting to come down, and they’re stressed by all these things that are out of their control.”
According to Finni Mortgages principal Eva Loisance, holding the cash rate won’t reverse the weakened property market but may slow further deterioration.
Loisance said with the cash rate at 4.35 per cent, financial conditions continue to be restrictive and borrowing capacity remains compressed, while buyer sentiment stays cautious.
“First home buyers with strong savings buffers may find better negotiation power in cooling markets; however, those relying heavily on borrowing capacity may need to adjust expectations or consider outer‑metro markets,” she told SPI.
She said that the current price declines in major capital markets have created opportunities but only for investors with strong cash flow buffers.
“Investors are the most sensitive cohort to rate movements. A hold today prevents further cash flow deterioration but keeps pressure high.”
“Some lenders have begun reducing selected variable rates despite the RBA hold, targeting low‑risk borrowers. This creates selective opportunities for refinancing.”
Listing on the rise
New listings are expected to keep flowing ahead of spring, with the RBA’s rate hold giving the property market more time to absorb the impact of its three previous hikes as consumer spending begins to slow.
According to LJ Hooker head of research, Mathew Tiller, higher interest rates, stretched affordability, and proposed tax changes have been driving stock higher, as homeowners transact and investors reassess returns amid weaker capital growth and rising costs.
“The rate hold will provide some reassurance, but this will not suddenly fix affordability.”
“Buyers are likely to be cautious because borrowing capacity remains tight while sellers may feel more comfortable coming to the market but will need to be realistic on price.”
He said that over the past few weeks there has been an increase in the number of properties up for sale ahead of spring, which has traditionally been considered the busiest time of the real estate calendar.
“Appraisal activity has remained solid but, in this market, the important measure is how many vendors are prepared to meet the market and actually list,” he said.
“Some sellers are likely trying to get a head of spring competition while conscious that another rate rise could further weaken buyer confidence and borrowing capacity.
He said that a softer market does not mean it is a bad time to sell.
“People continue to buy property every day because life continues to move as families grow, jobs change, or they may need to downsize or retire.“
Due to changing market conditions, private treaty campaigns have been favoured by vendors, with auction clearance volumes staying below last year.
He said that private treaty would create more opportunity to negotiate in a market where buyer depth has thinned.
“There is more stock coming to market, but that does not mean conditions are getting stronger, so people have to be realistic on price,” Tiller said.
“So, we expect spring to be starting earlier in terms of listing, but prices are falling, clearance rates are low, and buyers are being cautious, so we expect to see longer days on market as vendors try to negotiate the best deal possible.”
Commercial opportunities
On the other hand, JLL senior director, real estate economist, Ronak Bhimjiani said an income-led strategy remains central to Australia’s commercial property market, with strong rental growth helping investors protect returns as elevated inflation persists and capital growth becomes less reliable.
“This income resilience has proven remarkably durable through the cycle.”
He said that retail assets have demonstrated strong investor interest, capturing nearly 40 per cent of total core commercial real estate (CRE) transaction volumes in FY2025–26, which rose even when sentiment was fluttering.
“This underscores investor confidence in well-let, income-resilient assets regardless of the trajectory of the interest rate debate.”
Knight Frank’s chief economist Ben Burston said the RBA decision signalled the board was ready to wait and see whether the hikes earlier in the year have done enough to curb inflation.
He said property markets have largely absorbed the rate hikes, with office and industrial yields edging higher in Melbourne, Adelaide and Perth, but the impact has been far less disruptive than during the 2022–23 tightening cycle.
“While investors will feel that they aren’t out of the woods just yet, they will take heart from shifting market expectations which point to a lower probability of further rises, sensing that we are either close to or at the peak and starting to look ahead at the potential for rate cuts in 2027.”
Want to see more stories from trusted news sources?
Make Smart Property Investment a preferred news source on Google.
Click here to add Smart Property Investment as a preferred news source.
