2025 brings renewed energy to Canberra real estate amid predictions of an interest rate cut

The property market in and around Canberra is off to a positive start for 2025 with a surprisingly higher-than-normal number of sales in the past two months.

Windrose Property Principal Sam McGregor said the traditionally quieter months of December and January had been unusually active for Canberra, and it appeared buyers were snapping up homes ahead of an expected interest rate cut in mid-February.

“We have seen more transactions between December and January than the collective six months before that – and that includes five deals on the last business day of the year for 2024 when everyone was meant to be winding down for Christmas,” Sam said.

“It’s absolutely outstanding. Some agents take January off in its entirety because traditionally nothing happens and they don’t even bother coming back until February. This festive period has been very different.

“I haven’t seen such exuberance in the market in a long time, so the interesting thing for me is the half a per cent reduction in values is indicative of vendors meeting the market before a potential interest rate cut.”

The renewed enthusiasm comes despite the latest CoreLogic Hedonic Home Value Index, released on February 3, showing property prices in Canberra dipped by 0.5% in January to a median dwelling price of $850,534.

Three of Australia’s eight capital cities recorded a decline in home values in January, with Melbourne recording the sharpest drop of -0.6%, followed by the ACT at -0.5% and Sydney -0.4%.

Yet, Canberra real estate is well ahead in the long game. Values have surged by 61.8% in the past decade.

CoreLogic said financial markets were pricing in a 95% chance the cash rate will be cut by a quarter of a per cent when the Reserve Bank of Australia board meets on February 17 and 18.

The official cash rate has stayed at 4.35% for more than a year, and if rates do fall, it will be the first time since 2020.

Sam said any rate reduction would boost housing demand, increase borrowing capacity and provide repayment relief for mortgage holders, amid cost of living pressures.

“If interest rates come back and buyers are more confident, then the flow on will be that potential vendors will be looking to list their houses,” he said. “The conversation will be that you’re better to sell your house today at a slight discount than a more dramatic drop in weeks to come when your home will be compared against brand new stock.

“A half a percent drop in values when we had such significant stock come to market at the end of last year represents just how strong the market is at the moment.

“Three months ago, stock levels were up 30% year-on-year in spring and we didn’t see downward pressure on prices. That actually shows how strong the market is – and that has continued into January.”

CoreLogic’s Research Director Tim Lawless said with prospects of a rate cut, the housing outlook was looking more positive nationally, but any rise in home values was unlikely to materialise until rates returned to the pre-pandemic average and affordability improved.

“Lower mortgage rates and a subsequent lift in borrowing capacity as well as an under supply of newly built housing could be setting the foundations for a relatively shallow
housing downturn,” Mr Lawless said.

“But the easing cycle for interest rates is likely to be a gradual one, and we also have the ongoing headwinds of affordability constraints, normalising population growth and generally soft economic conditions to contend with.

“All things considered, the likelihood of a significant growth cycle over the coming year remains low.”