Reading between the lines

After reading my previous market update from three weeks ago, it was clear that I was overtly bullish about market growth for the second half of 2025 due to the continued surge in client enquiries, urgency, and attitude towards purchasing we are witnessing.

However, while I would love to tone down the overall momentum, the past couple of weeks have shown markets rising all around the country in July, and auction clearance rates are strengthening. I believe it is essential in this update to introduce more nuance to our thinking and identify the gaps where we are not seeing genuine urgency.

At lower price points, where first-time homebuyers and investors dominate the market under $1,000,000, it is undeniable that there is a growing force and pool of buyers outpacing the number of new properties coming onto the market.

First-time home buyers and investors are experiencing FOMO, aware that the 5% deposit scheme change will take effect in January. They do not want to miss the opportunity if rate cuts push prices higher in the coming months.

However, as the property price point increases, particularly over $2,000,000, the upgrader market dominates the buyer pool, and the story changes considerably due to affordability and borrowing capacity restraints holding them back.

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Even though many upgraders both want and, importantly, need to make a move due to their family's lifestyle circumstances, they are frustrated by the significant jump in cost to purchase another bedroom or two or to move to a substantially better home than what they currently own.

It is a hard pill to swallow and reconcile in their families' finances, it feels often like a lot more debt for not a lot more, and while they have a place to call home now, many upgraders delay the move as long as possible until they feel they must make it due to fear that it may not be feasible in the future.

Although upgraders are undoubtedly higher than in the last two to three years, they remain nervous and tentative, slowly approaching us to consider how to make it happen in late 2025 or 2026.

It will be interesting to track how that shifts over the next six months. I expect that with every rate cut, there will be a corresponding boost in confidence for the upgrader market, as the fear of having more debt on higher rates is currently paralysing upgraders from making a move. Particularly, when the bank rate falls below 5%, it will be more psychologically enticing and widely advertised.  

Importantly, on the other side of the coin, one of the most common roadblocks that is becoming embedded in the capital city housing markets is that the quality of potential future homes available for purchase on the market does not excite upgraders to buy.

Buyers feel like they are in a never-ending property gridlock of sorts. Many upgraders want to buy, but can't find something and must buy on long settlements before they look to sell.

Therefore, limited quality properties come on the market for sale, as owners of good properties are searching for a quality property to purchase before listing their own for sale.

Last week we saw the RBA cut, as expected. Nevertheless, the market still anticipates the RBA rate to be around 3% by Christmas.

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