Sydney’s housing market is on the edge of one of the biggest shifts in years, with new homeowners expected to get a circa $9,000 budget boost by year-end if expected interest rate cuts come to fruition.
This included a first cut expected to be announced at the Reserve Bank’s next board meeting in just over a week’s time, along with three additional rate reductions anticipated by big four banks.
The predicted savings for mortgage holders and new homebuyers is forecast to transform the market, launching a new race among buyers to snap up homes and lifting sales from upgraders.
SEE HOW MUCH HOMEOWNERS WILL SAVE IN EACH SUBURB
Experts have compared it to “floodgates opening” and revealed the increased competition for housing will push up prices in the coming months, reversing a current market slump that started in spring.
![Upsizers Albert and Abigail](data:image/svg+xml,%3Csvg xmlns="http://www.w3.org/2000/svg" viewBox="0 0 1280 720"%3E%3C/svg%3E)
Recent home purchases Abigail and Albert are excited about a rate cut, but are thankful they bought before buyer competition intensifies. Picture: Ted Lamb
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Modelling from research group PropTrack measured the average saving homeowners would get from the first cut, plus subsequent cuts, revealing Sydney mortgagors would get the biggest savings in the country.
New house owners across Greater Sydney would save an average of about $190 per month from a first 0.25 per cent cut, while unit owners would save an average $100 per month.
The savings would rise to $770 a month for house owners if there were four cuts this year – the expectations of CBA, Westpac and NAB – totalling $9240 for a full year of repayments.
Unit owners across Sydney would save an average $410 from four cuts – or just under $5,000 over a year.
These figures are unprecedented given how much prices – and debt levels – have gone up since the last time interest rates were cut.
But the money homeowners got back into their pockets would vary greatly across suburbs given the differing levels of debt required to get into each market.
An interest-rate cut of 0.25 per cent in February would trim about $270 from average repayments for buyers in Marrickville.
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PropTrack’s modelling showed a February cut, if passed in full by lenders, would trim $200-$900 off average monthly repayments in just over 300 suburbs – or about half the Greater Sydney area.
Homeowners would get back anywhere from $650 to over $2,000 a month in a similar number of suburbs if there were three cuts this year – the expectation among financial markets.
The average saving would rise to $800-$4,000 in much of Sydney if there were four rate cuts.
Suburbs where homeowners would get some of the biggest savings after four cuts (over $1,500 a month) included eastern suburbs Randwick and Paddington.
Others were Chatswood, Willoughby, Lane Cove and Cammeray on the north shore, and Concord, Haberfield, Drummoyne and Burwood in the inner west.
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PRD chief economist Dr Diaswati Mardiasmo said many potential buyers were waiting for an RBA cut before they made a move.
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PRD Real Estate chief economist Diaswati Mardiasmo said the mood ahead of the expected rate cut was like a race.
“It seems like there is large section of the market waiting for the gun to go off,” she said, adding that many would-be buyers and sellers have been holding off moving until there is a rate cut.
“Market sentiment is going to change and that may make more of a difference then just the mortgage relief,” Dr Mardiasmo said.
“When rates first started to climb in 2022, buyers held back because they were unsure what they would be paying, but a cut gives a lot more certainty about what they’ll be paying.”
Investment adviser George Markoski said the cuts could open one of the “biggest floodgates in the history of the market” given that many would-be buyers have been sitting on the sidelines waiting for a cut.
Some of the buyers most encouraged by a cut would be investors, Mr Markoski said in a note to clients.
Castle Hill homeowners will get some of the biggest savings from a first cut, averaging $320 a month.
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REA Group economist Angus Moore said confidence in a rate cut has been growing following months of falling inflation and even if the Reserve Bank were to hold in February, it’s likely a cut would come soon after.
“Expectations are very strong right now,” he said. “The main reason we wouldn’t see a cut is if the Reserve Bank saw signs that inflation was more entrenched than previously thought. But all the signs point to it reducing.”
Interest rate reductions have historically driven up activity in the housing market, but the impact on prices was harder to predict, Mr Moore said.
“We’re expecting a price boost, but housing affordability is at the worst level in three decades and that may put a bit of a damper on price rises … they may not be as high as in previous rate cut cycles.”
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REA Group economist Angus Moore said home prices would increase after a cut but housing affordability barriers may mute the speed of the price hikes.
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Mortgage Choice-Surry Hills broker Jason Lin said a common theme among buyers seeking pre-approval for a loan was excitement about the prospect of “improving their lifestyle”.
“It’s not just about having more to spend on a home,” he said. “Some people look at it, and they’re excited about maybe having a bit extra leftover to spend on themselves.”
Baulkham Hills residents Abigail Colorado and Albert Vilaykoun recently bought an investment property in Queensland after a long search and said they were glad to have bought before a cut.
“For us, an interest-rate cut would be the ‘cherry on top’, but I think if we were still looking it would get harder,” Mr Vilaykoun said. “The market is already competitive and a rate cut will make it even more competitive. We have spoken to a few people still looking to buy and I think it will be hard for them.”
