Should I buy a house now or wait until 2025?

Experts predicted interest rate cuts of at least 25 basis points in 2024 … but they haven’t happened.

Now, the big four banks – CBA, ANZ, NAB and Westpac – are split on when the Reserve Bank of Australia (RBA) will issue its first rate cut in 2025. CBA and ANZ  forecast it will happen in February 2025, but NAB and Westpac have tipped rates will not move until May 2025.

Property prices have continued to rise in 2024, even without interest rate cuts. Some cities are still hitting record prices.

However, Domain’s latest quarterly data, released in its September House Price Report, showed that house and unit price growth has slowed considerably and prices are falling in some cities. 

The market has changed, and for buyers, the conditions are better now than they have been for a while.

However, with forecasts of interest rate cuts on the horizon, potential buyers are asking the question (yet again): Should I buy now or wait until 2025?

“It’s challenging because it’s a different narrative depending on where you’re purchasing, because we’ve got some cities that are still seeing strong rates of price growth, and the longer you wait, the higher prices could be,” says Domain chief of research and economics Dr Nicola Powell.

“That means you do have to take on more debt. 

“The fact that [the cash rate cut] dominated the conversation so much in 2024 means there’s just so much anxiety now around when that rate cut is going to come through, and it’s going to bring much-needed relief [to those to high levels of debt].”

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Will interest rates go down in 2025?

While Australians may be holding their collective breath for rate cuts and the ensuing financial relief, the reality is the effects are likely to be minimal – up to 50 basis points – says BIS Oxford Economics Sean Langcake, adding that would pale in comparison to the 13 rate hikes seen in 2022.

“People are probably going to end up getting pretty disappointed for a lot of next year, much like we did this year,” he says. 

“Those that are saying February are going to end up kind of needing to push back their forecasts. Our forecast is for May, and I feel there’s more danger, and it’s still too early than too late at this stage.”

While forecasts are sometimes helpful, they should not be taken as gospel because the future is unpredictable, says Langcake.

Currently, inflation is at 2.8 per cent, which is within the RBA’s 2-3 per cent target. However, with the holiday period in full swing, inflation is likely to see a bump in the next few months, says PRD real estate chief economist Dr Diaswati Mardiasmo.

“We see a lot more groceries, entertainment, holidays, all of those sorts of spending goes up, which can potentially increase the inflation rate a little bit [and prevent a February 2025 cut],” she says.

However, Mardiasmo believes that global patterns make the chances of a rate cut in 2025 much higher than ever.

“If we look across the world, many other economies have already cut their cash rate – the US, UK, Canada, and New Zealand – so we’re pretty much the only ones holding stable.

“Traditionally speaking, if we look back to 2022 when the global cash rate increases happened, all the other countries started increasing their cash rate about four to six months earlier than us.

“We’re pretty much hitting the six-month mark after other countries have cut their cash rate, so if we follow the pattern, we’re six months behind this coming February,” she says.

Should I consider future interest rate cuts when buying property?

Many experts advise not using the potential cash rate cut as the main deciding factor on whether or not to enter the property market.

“The best time to buy is when you’re personally ready,” says Ray White Group chief economist Nerida Conisbee.

“Trying to time the market is incredibly difficult. When we saw rates starting to increase, the market was widely predicted to fall dramatically, but then it didn’t end up falling,” she says.

Australia’s median house price grew by $80,000 (7.8 per cent) to $1,155,683 over the past 12 months, according to Domain data.

Waiting for a cash rate cut also lessens a buyer’s chances of getting into a home in a preferred suburb, says Powell.

“If you wait, it might not be available when rates are cut, particularly if you’re trying to get into a tightly-held area where you know you’ve got to move on the opportunity when it comes, in terms of when that listing comes onto the market,” she says.

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While some buyers might be waiting for the cash rate to fall before entering the property market, Brisbane-based buyer agent Lauren Jones says a higher proportion want to buy now because they believe the cash rate cut will push up prices.

She says a cash rate cut is more likely to change buyer sentiment towards being interested in buying and bring back FOMO (the fear of missing out) as more people jump into the market. 

“I don’t think it is going to be as crazy as [the FOMO was in 2020-2022],” Jones says. “When the rates start to drop, probably a few months after that, we will see a slightly higher percentage growth rate.”

Langcake agrees, saying those looking to buy shouldn’t stress too much about rate cuts.

“The decision whether or not to buy shouldn’t be influenced by one or two interest rate moves one way or another. When you’re assessed to get a loan, your bank will have to assess whether you can pay back your loan when interest rates are a fair bit higher than they are at the time of the application.

“Historically, prices have always generally trended higher, so you’ve done well in Australia if you bought sooner rather than later.”

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