Elite Agent | Rate Hike Signals Slower Gear for the Housing Market

Catherine Nikas-Boulos reports on the Reserve Bank of Australia's decision to raise the cash rate by 25 basis points to 3.85 per cent, gathering reactions from leading property economists and industry figures, published by Elite Agent.

The rate rise — prompted by above-forecast inflation and a resilient labour market — marks a significant shift from earlier expectations of further cuts, with experts broadly agreeing it will weigh on borrowing capacity and buyer confidence through 2026. Economists from Domain, REA Group, Ray White and LJ Hooker all point to ongoing supply constraints as the key buffer against sharp price falls, while flagging that growth will moderate, particularly in Sydney and Melbourne where buyers are most sensitive to rate movements.

Oliver Hume Property Group chief economist Matt Bell notes that financial markets had priced in approximately a 66 per cent chance of a hike, and that the Board's decision signals the end of a dramatic turnaround in expectations across the second half of 2025. Bell cautions that the full effect of the 0.75 per cent in cuts delivered last year is yet to flow through to household balance sheets and purchasing decisions — and that the reason rates are rising again is itself a sign of economic strength, with household spending, employment and growth all running hotter than anticipated.

Bell flags that some softening is already evident in Sydney and Melbourne's established house price data for December and January, though he expects the broader market to remain supported by fundamental demand drivers including population growth and constrained new supply.

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