RBA Holds Rates: What This Means for Property in 2025

The Reserve Bank of Australia (RBA) has kept interest rates unchanged at 4.35% for the eighth consecutive meeting, marking one year since the last rate hike. While inflation has eased to its lowest level in nearly four years, the RBA believes it remains "too high" and requires restrictive policy to bring it further down.

Inflation and Economic Forecasts

Despite inflation's drop to 2.8% in the September quarter, core inflation is still elevated at 3.5%. The RBA's latest forecasts indicate that inflation will not sustainably return to the 2-3% target range until 2026. The bank emphasised the need for a vigilant stance on inflation, with policy remaining restrictive until it’s confident of long-term stability.

Potential Rate Cuts in 2025

Economists expect the RBA may begin easing rates in the first half of 2025, though RBA Governor Michele Bullock stressed that any decision to cut rates will depend on sustained progress toward inflation goals. While Australia's major banks predict rate cuts next year, Bullock refrained from committing to a specific timeline.

Global Risks and Economic Outlook

The RBA is closely monitoring global risks, including economic conditions in China and potential policy shifts in the U.S., both of which could impact the global economy. Bullock also noted that any future rate cuts would not return to the emergency low levels seen during the pandemic, as those conditions were temporary.

What This Means for Real Estate

The decision to keep rates steady means borrowing costs will remain high, which could challenge affordability for buyers and slow demand in the real estate market. In areas like Perth, where supply is already tight, property prices may hold steady or even remain firm. While some buyers are delaying purchases in the hopes of lower rates, others may miss out on current opportunities. Historically, when the RBA cuts rates, property prices tend to increase as demand spikes, especially when more buyers re-enter the market. For those hoping to buy, the lesson is clear: timing the market is difficult, and waiting for rates to drop might result in paying a higher price later on.