How much first interest rate cut could boost Geelong prices

Home prices could surge almost $14,000 in some Geelong suburbs if history repeats when the Reserve Bank next cuts interest rates.

New analysis from Ray White shows every suburb recorded an uptick within four weeks of the past three reduction cycles, excluding emergency cuts during the pandemic.

The figures point to premium coastal and inner ring Geelong suburbs notching the biggest boost when rates start to fall again.

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5 St James St, Geelong West, goes to auction on Saturday with $950,000 to $1.045m price hopes.

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Lorne homeowners stand to gain the most, with the holiday town’s $1.526m median house price tipped to rise by $13,712 or 0.9 per cent.

Newtown, Geelong West/Hamlyn Heights, Torquay and Ocean Grove would see a similar percentage gains if history repeats.

The trend could add $10,399 to Newtown’s $1.176m median price, while house prices in Geelong West could rise almost $7000.

Economists of have brought forward interest rate cut predictions, with many now expecting the Reserve Bank to lower the official 4.35 per cent cash rate as early as February next year.

McGrath, Geelong director David Cortous said the Geelong market would respond well to a downward move.

McGrath, Geelong agent David Cortous says investors are already returning, suggesting Geelong’s market has hit the bottom.

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“Obviously the impact that it’s had on our property market when they moved up has been quite substantial for regional Victoria, between higher interest rates, cost of living and increased taxes under the Andrews Government, all three have impacted property prices in Victoria,” Mr Cortous said.

“I think the only thing that would stimulate the market are interest rate cuts and I would foresee that we will see a lot more buoyant market once we get a couple of cuts.

“It gives people confidence and it gives people more borrowing power.”

He said the return of investors and first-home buyers in Geelong in recent months signalled prices may have bottomed out.

“When you see that it’s another identifier of the market probably being at the bottom because you have got investors seeing value,” he said.

“Once any product shows value that is where people are and there’s plenty of value in the market at the moment and buyers are acting on that.”

Ray White Group chief economist Nerida Conisbee thinks we’ll see a rate cut by March at the latest.

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Ray White chief economist Nerida Conisbee said the impact from the next rate cut could be even bigger than history dictated in some areas.

Ms Conisbee said Melbourne and Sydney were the most sensitive cities in the nation to rate cuts due to high house prices and would broadly see the biggest response.

Another key to the rate cut’s impact on home values would be in how the Reserve Bank announced it.

“If most people are expecting four cuts next year, that will change sentiment to be far more positive,” Ms Conisbee said.

The economist said she believed there would be a rate cut this year or by March at the latest, but that it would only be a 0.25 per cent improvement for mortgage holders.

Lorne houses, like this one at 21A Toorak Tce, which recently sold for $1.545m, could be the biggest winner if historical trends are anything to go by.

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Maxwell Collins, Geelong director Nick Lord said that would likely be enough to boost Geelong’s property market, despite it traditionally taking three consecutive rate cuts or rises to change momentum.

“This time, given that we have had such a long wait for a decline in interest rates and people’s focus and keenness to enter the market, they are just waiting for that, almost like a green light,” Mr Lord said.

“Any interest rate cut, when it comes, I think will see a higher surge of buyers into the market than historically we would off one interest rate rise.”

INTEREST RATE CUT PRICE IMPACT MODELLING

Source: Ray White