Here at Holdsworth Real Estate, we know that any news from the Reserve Bank of Australia (RBA) raises one big question for our clients: “What does this mean for the Perth property market?”

The recent decision by the RBA to cut the official cash rate by 0.25 per cent is certainly welcome news. For current homeowners, it offers some relief on mortgage repayments. For those aspiring to enter the market, it provides a helping hand.

But the most common question we’re asked when rates fall is whether this will inevitably drive property prices higher. The answer, especially here in Perth, is more nuanced than a simple “yes.” Let’s break down what this rate cut really means for you.

Will Prices Take Off With New Rates? A Look at History

It’s true that historically, rate-cutting cycles have often corresponded with rising property values. In fact, over the past 25 years, Perth property prices have risen after four of the five rate-cutting cycles.

However, it’s crucial to understand that Perth’s property market often dances to its own beat, being less sensitive to interest rate changes than Sydney and Melbourne, and more influenced by our unique local economic conditions.

Let’s look at the evidence:

• 2001-2002: Interest rates fell by 1.5 per cent. Perth’s median house price saw a solid 22.9 per cent increase. In contrast, Sydney’s market soared by 44.5 per cent.
• 2015-2016: As rates were cut, Sydney and Melbourne prices jumped 28.5 per cent and 15.1 per cent respectively. Here in Perth, our market actually declined by 2.8 per cent. Why? At the time, WA was grappling with an economic downturn, population growth was low, and consumer confidence was shaky.
• 2019-2021: A 1.4 per cent drop in rates saw Perth prices rise by a modest 5.1 per cent, while Sydney and Melbourne experienced massive growth of 36.6 per cent and 28.7 per cent.

This history teaches us a valuable lesson: interest rates are just one piece of the Perth property puzzle.

The 2025 Outlook: A Strong Foundation

So, as we enter this new rate-cutting cycle, what does the local picture look like?

Fortunately, the fundamentals of the Western Australian economy are incredibly strong. We are experiencing:

• A robust economy
• Low unemployment
• Strong and sustained population growth

Perth house prices have already been on an upward trajectory, independent of interest rate movements. With these strong economic conditions as our foundation, it is likely that lower rates will support continued, steady growth in the market over time.

A Note of Caution

While the economic outlook is positive, we cannot ignore the challenges of the recent past. West Australian households have weathered a period of high inflation and absorbed 13 interest rate hikes between May 2022 and November 2023.

This has made consumers more cautious and prudent with their spending. The frenzy and urgency we saw in the market previously have subsided. This more measured approach from buyers will likely moderate the impact of the recent rate cut, preventing a sudden, sharp spike in prices.

For investors, the rate reduction is a positive signal, likely to boost sentiment as lower borrowing costs improve potential yields. This could, in turn, encourage more investment in the rental market, which would be a welcome development for supply.

Our Advice for You

Navigating any market is about making smart decisions based on your personal circumstances.

• For Homebuyers: The most important rule is to buy what you can comfortably afford. Don’t overextend your finances. Use this new rate environment to find a home that suits your budget and long-term goals.
• For Homeowners: If you have an existing mortgage, consider this rate cut an opportunity. By continuing to pay your mortgage at the previous, higher rate, you can pay down your principal faster, build valuable equity, and create a financial buffer for the future.

Whether you’re looking to buy your first home, find your next one, or make a strategic investment, understanding these market dynamics is key. The team at Holdsworth Real Estate is here to provide the expert guidance you need. Contact us today for a personalised consultation on how to make the current market work for you.