Gradual RBA easing offers limited boost; market still in transition phase
Australia’s housing market continues to tread cautiously through 2025, according to Westpac’s latest Housing Pulse, which highlights a subdued yet stable landscape. While some indicators point to renewed momentum, overall conditions remain restrained.
Property values are seeing modest gains and market turnover remains low. “Price growth is subdued, turnover soft and conditions have converged across markets,” said Matthew Hassan (pictured above), head of Australian macro-forecasting at Westpac.
The report attributes the restrained environment to a confluence of affordability challenges and cautious buyer sentiment, despite rate cuts from the Reserve Bank of Australia (RBA). It also notes that both high-frequency data and forward-looking indicators reflect a mild positive response to monetary easing, but it’s not translating into a widespread rebound.
“The reaction remains measured to date,” said Hassan, adding that Westpac had anticipated a muted affordability-constrained response due to high starting prices and the nature of the RBA’s gradual cuts.
Although interest rate sensitivity remains a hallmark of the housing sector, this cycle is seeing buyers exercise restraint. Anecdotal evidence suggests prospective buyers are becoming more active, but are quick to step back when prices exceed their comfort levels.
A key takeaway from the Westpac report is the performance variation across housing segments. Hassan noted that the relative outperformance of lower and middle tier segments in all of the major capital cities is reinforcing a price-sensitive buyer base. There are signs of recovery in top-tier segments, particularly after the RBA's moves, but the gains are described as neither strong nor consistent.
Westpac’s analysis presents 2025 as a transitional phase, where pent-up demand has yet to fully materialise. Consumer sentiment about future price growth is relatively optimistic, but Hassan cautioned that buyer sentiment could shift quickly if market dynamics change. For now, it remains “decidedly lukewarm.”
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