The areas that benefitted the most from previous cash rate cuts
Over the past decade, Australia has experienced three major interest rate cycles. Ray White Group Chief Economist Nerida Conisbee, who has analysed suburb-level data from Neoval, has found that “each cycle has benefited entirely different segments of the market, with the most responsive areas shifting dramatically based on the economic context and buyer demographics of each period”.
During the first cycle, in 2015-2016, when the cash rate fell from 2.25% to 1.50%, the main beneficiaries were coastal lifestyle areas within commuting distance of major cities, according to Ms Conisbee. NSW’s Central Coast was the standout. At the time, the homes being purchased were typically priced between $800,000 and $1.2 million, and appealed to buyers seeking affordability and lifestyle while still being able to access Sydney.
During the second cycle, in 2019-2021, when the cash rate fell from 1.50% to 0.10%, the strongest demand occurred in Sydney’s premium suburbs. Established owners took advantage of ultra-low rates and government stimulus to upgrade or invest, creating a pronounced wealth effect.
New cycle “increasingly serves first-home buyers”
In the current cycle, which has seen the cash rate fall from 4.35% in February to 3.60% today, affordable outer suburbs have been the biggest beneficiaries.
Perth has led the way, while Adelaide’s outer suburbs – priced between $550,000 and $750,000 – have also recorded strong growth.
“This marks a dramatic shift from previous cycles, with the most rate-sensitive areas now concentrated among affordable markets rather than lifestyle or premium segments, reflecting how Australia's housing affordability crisis has fundamentally changed who benefits most from monetary easing,” Ms Conisbee said.
“As further rate cuts are anticipated, the current pattern suggests Australia's monetary policy increasingly serves first home buyers, a profound shift from what happened during COVID,” she said.
Thinking about how shifting interest rates might affect your property plans? Contact us to discuss what these changes could mean for your situation.