Rate freeze unlikely to halt property market momentum, experts say
By
The Reserve Bank of Australia (RBA) has opted to maintain the cash rate at 3.60 per cent, a decision that, according to industry experts, is unlikely to dampen the competitive nature of the property market. Despite persistent inflation concerns, the market is expected to continue offering moderate yet sustained returns into 2026 and beyond.
The RBA’s decision comes after three rate cuts earlier in 2025. However, inflation has remained a pressing issue, affecting buyer confidence and pushing auction clearance rates to their lowest levels of the year. RBA Governor Michele Bullock commented on the board’s decision, stating that caution was necessary until more data could be evaluated. “Recent data suggest the risks to inflation have tilted to the upside, but it will take a little longer to assess the persistence of inflationary pressures,” Bullock said.
Bullock also hinted at the possibility of a rate rise next year, although the decision would be made on a meeting-by-meeting basis. “I don’t think there are interest rate cuts on the horizon for the foreseeable future. The question is, is it just an extended hold from here, or is it the possibility of a rate rise?” she pondered. “I couldn’t put a probability on those, but I think they’re the two things that the board will be looking closely at coming into the new year.”
While borrowers may not see further mortgage relief soon, the steady rate is expected to stabilise the market, providing some respite for both buyers and sellers. Eleanor Creagh, senior economist at REA Group, noted that the cash rate hold was anticipated, given the stronger-than-expected inflation. She explained that this year’s 0.75-point decline in rates has already bolstered borrowing capacity and contributed to a rebound in home prices. “Earlier cuts and stronger confidence continue to support buyer demand, aided by population inflows and the expansion of the Home Guarantee Scheme. With new supply constrained, these factors will keep upward pressure on prices throughout the summer,” Creagh said.
Despite ongoing demand, Creagh expects property prices to moderate in 2026. She pointed out that November’s monthly growth had already slowed to 0.5 per cent nationwide, indicating a cooling trend despite an annual rise of 8.7 per cent, the fastest since mid-2022. “With interest rates now expected to remain on hold for an extended period, affordability constraints are likely to see price growth moderate throughout 2026,” she added.
Mathew Tiller, head of research and business intelligence at LJ Hooker, echoed these sentiments, suggesting that steady rates would maintain market confidence and encourage more sellers to list their properties. “While many people would like a rate reduction to help household budgets, especially at this time of the year, the upside is that steady interest rates should keep buyer demand ticking over without lighting another rapid price surge,” Tiller remarked. He also predicted an increase in listings in 2026, which could help ease market pressure. “More sellers are likely to come to the market in 2026, so listings should lift from very low levels, and that will also assist in taking some heat out of the market,” he said.
Tiller further noted that the investor market would remain competitive due to a tight rental market and low construction levels, which would continue to drive up rents and dwelling values. “Looking to 2026, we expect buyer demand to remain elevated, and it’s likely even with more homes coming on the market, prices will continue to rise, but at a more measured pace,” he explained.
Despite the expected moderation in property values in 2026, experts forecast that house prices could increase by over $100,000 by 2027. According to a Canstar analysis of Westpac’s data via Cotality, five of the six major capitals could see median house prices exceed $1 million, up from only two currently. Perth is projected to experience the strongest gains, with dwelling price increases of 8 per cent in 2026 and 6 per cent in 2027, potentially raising the median house price to $1,090,053 by the end of 2027.
Sally Tindall, Canstar.com.au’s data insights director, commented on these forecasts, acknowledging that while they may not always materialise, they indicate continued solid gains in markets where demand outstrips supply. “Great for anyone buying now; if it materialises, however, for those struggling to get into the market, it’s yet another reminder of how far the goalposts can move,” Tindall said. She also warned that a rate hike in 2026 might cool the market somewhat but was unlikely to cause prices to fall significantly. “Unless we see a meaningful uptick in supply or a significant shift in economic conditions, the market is likely to keep marching higher,” Tindall concluded.
The article was first published in Real Estate Business, a sister publication of Property Buzz.