August 28, 2025 • 10 mins
Are we entering another house price boom?
The spring selling season is just about to begin - and we’re entering the season with a fresh interest rate cut, and more expected in coming months. And at the same time, the government is bringing forward its program to help first home buyers into the market. So what will it do to house prices?
Michael Thompson is joined by Dr Nicola Powell, Chief of Research & Economics at Domain.
Fear & Greed Q+A: Join Sean Aylmer & Michael Thompson and the team as they answer questions on business, investing, economics, politics and more. If you have your own question, get in touch via our website, LinkedIn, Instagram or Facebook!
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Welcome to Fear and Greed Q and A, where we
ask and answer questions about business, investing, economics, politics and more.
I'm Michael Thompson, and today are we entering another house
price boom? The spring selling season is just about to begin,
and we are coming into the season with a fresh
interest rate cut two earlier in the year and more
expected in coming months. And at the same time, the
government is bringing forward its program to help first home
(00:27):
buyers into the market. So the big question is what
is it all going to mean for house prices. Doctor
Nicola Powell is the chief of Research and Economics at
Domain Nicola Welcome back to Fear and Greed Q and A.
Speaker 2 (00:38):
Hi Michael, thanks so much for having me on again.
Speaker 1 (00:41):
I'm going to ask you probably the most obvious question.
It's almost embarrassing that I'm asking you, but why is
spring such a pivotal moment for the housing market? Is
it as simple as the weather.
Speaker 2 (00:53):
Look, the weather is actually part of it, Michael, and look,
and I love a really simple answer, but I think
there are two things that go on. You know, in spring,
it is when our homes present the best. So it
is when you see a lot of sellers coming to
market and most sellers are buyers and buyers are sellers.
But I think the interesting thing for Australia is there
is another item that really kind of drives that activity
(01:14):
higher over the spring season. It's not just about when
our homes look the best. It's also about getting that
deal done before Christmas. We have to remember that in
Australia the school year aligns to the calendar year. We
have big summer holidays December January, and it really is
about doing that transaction so you can settle into that
new home before the end of the year and start
(01:35):
the new year totally afresh.
Speaker 1 (01:36):
Okay, And you see that then in the data, don't you,
Because listings jump what is it, six percent from winter
to spring and is that reflected then in the number
of sales as well?
Speaker 2 (01:45):
It absolutely is, So you see a lift in the
number of listings and you also see higher transactional activity.
So in total, when you're looking at winter into spring,
sours tend to increase by about a percent on that
national scale. Interesting in the auction side, the volume of
auction skyrockets. So for spring, when you do that comparison
(02:06):
directly from winter into spring, it lifts by about thirty
one percent. So there's lots of auction activity occurring normally
in a spring season and we're expecting that so to
be this spring too.
Speaker 1 (02:19):
So that's interesting. So auctions, there are more auctions as
a percentage of the overall kind of house transactions in spring.
Speaker 2 (02:28):
We do tend to find that. So a lot of
new listings that come on in spring, they tend to
come on, particularly in our big market Sydney and Melbourne,
they come on as as auctions.
Speaker 1 (02:37):
Okay, all right, And clearance rates we're heading into this
particular spring, clearance rates are very high, I think near
decade highs. Is the expectation that that can continue even
with greater supply in the market.
Speaker 2 (02:51):
Look, I think they will. I think the thing with
clearance rates is they've been very consistent and we've seen
a consistent improvement. And that's the type of thing you
want to be looking out when you're looking at market
momentum and whether that momentum is building not only in
clearance rates but across out other market metrics, and when
you have a look at how winter has performed, clearance
rates have been strong. When you look at monthly clearance
(03:12):
rates over the last decade. In June it was the
fourth highest clearance rate that we've seen over the past
decade in June, and then in July improved even more
and it was the third highest clearance rate that we've
seen for of July months over the last decade. We
haven't quite closed off August, but we're expecting a similar outcome.
You know, even when we look at the big auction
(03:32):
markets of Sydney and Melbourne, they've been consistently performing, consistently
seeing those clearance rates in the low seventies, and I think,
you know, for me, Melbourne is one of those markets
that's really seen a sharp turn around in market dynamics.
Speaker 1 (03:45):
Okay, so clearly there is a lot of confidence, there's
a bit of optimism out there in the market. We've
had three interest rates so far now just one just
this month. The expectation there is that there will be
more to come. What is that going to do then
for prices? Are we going to see this cheaper borrowing
kind of supercharge spring.
Speaker 2 (04:04):
It is absolutely helping to provide momentum. I think it's
giving buyers a bit more confidence, a bit more certainty.
And the interesting dynamic is our capital cities don't necessarily
react the same to a reduction in the cashret What
you tend to find is Sydney and Melbourne a much
more sensitive to changes in the cashret and it's amplified
(04:24):
through their housing markets at a quicker pace than our
other slightly more affordable capital cities. And that is exactly
what we're seeing. We're seeing momentum coming back in more
so to Sydney and Melbourne, and we're seeing those more
affordability driven markets that were Perth and Adelaide. They're still
growing in price, but they're certainly not losing a bit
(04:44):
of momentum compared to what they were seeing. And I
think you opened this question by asking about confidence. You know,
sentiment is a really powerful driver of housing dynamics and
when you look at overall Australia consumer confidence, it is
rising and it's still negative, but it's almost edged into
a positive, so it is rising. And what you tend
(05:05):
to find is when you have consumer sentiment rising, we've
also got the cash rate being reduced. This plays out
historically well for housing dynamics and particularly for sellers of homeowners.
Speaker 1 (05:16):
Yeah, it's interesting, isn't When we talk about that consumer
confidence and that optimism. The sentiment, as you say, it
is still negative, but it's at its highest point in
three and a half years, so it is all relative.
All of a sudden, it feels like anything is possible,
and we are seeing this playing out. We've got prices
in the market have risen was it nine percent in
just six months this year. That's one of the strongest
(05:37):
starts in a decade. Now you would think then that
based on what we have seen now playing out over
the last month, that that pace can continue.
Speaker 2 (05:45):
Look, I'm pretty confident that that pace is going to continue.
And I was always of the view if we saw
the RBA deliver a rate cart in August, that is
going to provide the platform for a robust spring selling season.
And then you've got to also there's a third ynamic here, Michael,
where we've got the government bringing forward their first home
buyer incentive to October, smack bang in the middle of
(06:09):
the spring selling season, right, So all of those first
home buyers that were waiting until next year to make
their purchase will be coming to market in spring. Because
the group of first home buyers that are going to
benefit from this fast tracked first home buyer policy are
going to be the ones that get in first, because
we know that anything on the demand side in terms
(06:30):
of policy does prop up property price, and what we're
likely to see is more affordable sectors of the market
and are going to grow faster, and unit prices will
also grow faster, particularly in our big capital cities that
are most expensive.
Speaker 1 (06:44):
Because part of the changes to the first home Buyers
scheme there was not just bringing it forward, but it
was also increasing the caps, wasn't it For cities in Sydney?
I think it went up to one and a half
million dollars. How important was it for those changes to
be made in order to keep pace with the markets?
Speaker 2 (07:00):
I think it was a very sensible decision to increase
the property price caps. And you're right in Sydney, it's
one point five In Melbourne and it's nine hundred and
fifty thousand. So what this does. It's not necessarily a
game changer for units because the old caps captured quite
a broad spectrum of suburbs for units, but it means
that there's more choice. If a first home buyer is
(07:20):
wanting to purchase a house, they've got more choice in
terms of the suburbs, but they've Also, there's no income caps,
so it doesn't matter if as long as you're a
first time buy it doesn't matter how much you're earning,
you're eligible for. This policy of is designed for all
Australians that are looking to purchase their first home. So
I think the increase in caps basically brings it in
line with where the market is. It gives greater choice,
(07:43):
and I do think that the more choice we provide
it doesn't pig in the whole. First home buyers to
certain suburbs or certain locations, diverse array of suburbs is key.
Giving them choice is key. But irrespective of that, we're
still likely to see prices being pushed. We've got three
really powerful dynamics going on that are going to drive
(08:04):
property prices upwards.
Speaker 1 (08:06):
You made a comment before that really the one to
move earliest are the first home buyers that are going
to be able to take advantage of this. How big
a risk is there that this is really those three
factors that you've said are all going to combine push
house prices up to the point that really first home
buyers are priced out again pretty much by the end
of the year.
Speaker 2 (08:26):
It's an absolute, almost like throwing a firelighter on the
house market in terms of a demand policy. I think
that particularly because there's no caps on the number and
there's no caps on the income. You know, we could
actually be staring down the barrel here of first home
buyer activity competing with levels we saw back in two
thousand and nine when we saw significant increases in grants
(08:50):
available for first home buyers. So I think we have
to be very cautious here that we could really see
a strong way for first home buyer activity coming into
the market. I think the winners here are going to
be those that get in early or already in the
housing market, because what we will absolutely see is stronger
rates of price growth the certain sectors sub sectors of
(09:13):
our housing market.
Speaker 1 (09:14):
Do you think it's going to bring more houses to
market that the announcement by the federal government direct And
we will see an increase now in listings as well,
because there is this kind of hope that the market's
about to get super charged.
Speaker 2 (09:27):
Look, you know, there might be those investors that think,
look now is the right time to sell. You know,
what you tend to find is first time buyers and
investors do compete for similar priced properties. It might be
a good spur as well for the developers, particularly in
pre sales. The development sector. The construction sector is still
very challenged and ultimately, I mean, you know you said
(09:48):
it in your question there, we still have an undersupplied
housing market and the aspect is we still need to
build more homes, and productivity in the construction sector is low.
Build times of lengthened significantly. We need to really still
focus on supply and I'm not a fan of demand policies.
I think it just makes it harder for the next
(10:09):
wave of buyers that come in, and I think we
should be doing everything in our power to ensure that supply,
affordable supply, increased densification, and a diverse array of housing
is delivered across our major capital cities and into some
of our regional markets as well.
Speaker 1 (10:24):
All Right, we are out of time, Nicola, thank you
for talking to Fear and Greed.
Speaker 2 (10:28):
Thank you.
Speaker 1 (10:28):
That was doctor Nicola Powell, head of Research and economics
at Domain. If you've got something that you would like
to know on this podcast, then please send me you
a question on LinkedIn, Instagram, Facebook, or at Fearandegreed dot
com dot au. Are Michael Thompson and this is fear
and greed Q and a
Welcome to Fear and Greed Q and A, where we
ask and answer questions about business, investing, economics, politics and more.
I'm Michael Thompson, and today are we entering another house
price boom? The spring selling season is just about to begin,
and we are coming into the season with a fresh
interest rate cut two earlier in the year and more
expected in coming months. And at the same time, the
government is bringing forward its program to help first home
(00:27):
buyers into the market. So the big question is what
is it all going to mean for house prices. Doctor
Nicola Powell is the chief of Research and Economics at
Domain Nicola Welcome back to Fear and Greed Q and A.
Speaker 2 (00:38):
Hi Michael, thanks so much for having me on again.
Speaker 1 (00:41):
I'm going to ask you probably the most obvious question.
It's almost embarrassing that I'm asking you, but why is
spring such a pivotal moment for the housing market? Is
it as simple as the weather.
Speaker 2 (00:53):
Look, the weather is actually part of it, Michael, and look,
and I love a really simple answer, but I think
there are two things that go on. You know, in spring,
it is when our homes present the best. So it
is when you see a lot of sellers coming to
market and most sellers are buyers and buyers are sellers.
But I think the interesting thing for Australia is there
is another item that really kind of drives that activity
(01:14):
higher over the spring season. It's not just about when
our homes look the best. It's also about getting that
deal done before Christmas. We have to remember that in
Australia the school year aligns to the calendar year. We
have big summer holidays December January, and it really is
about doing that transaction so you can settle into that
new home before the end of the year and start
(01:35):
the new year totally afresh.
Speaker 1 (01:36):
Okay, And you see that then in the data, don't you,
Because listings jump what is it, six percent from winter
to spring and is that reflected then in the number
of sales as well?
Speaker 2 (01:45):
It absolutely is, So you see a lift in the
number of listings and you also see higher transactional activity.
So in total, when you're looking at winter into spring,
sours tend to increase by about a percent on that
national scale. Interesting in the auction side, the volume of
auction skyrockets. So for spring, when you do that comparison
(02:06):
directly from winter into spring, it lifts by about thirty
one percent. So there's lots of auction activity occurring normally
in a spring season and we're expecting that so to
be this spring too.
Speaker 1 (02:19):
So that's interesting. So auctions, there are more auctions as
a percentage of the overall kind of house transactions in spring.
Speaker 2 (02:28):
We do tend to find that. So a lot of
new listings that come on in spring, they tend to
come on, particularly in our big market Sydney and Melbourne,
they come on as as auctions.
Speaker 1 (02:37):
Okay, all right, And clearance rates we're heading into this
particular spring, clearance rates are very high, I think near
decade highs. Is the expectation that that can continue even
with greater supply in the market.
Speaker 2 (02:51):
Look, I think they will. I think the thing with
clearance rates is they've been very consistent and we've seen
a consistent improvement. And that's the type of thing you
want to be looking out when you're looking at market
momentum and whether that momentum is building not only in
clearance rates but across out other market metrics, and when
you have a look at how winter has performed, clearance
rates have been strong. When you look at monthly clearance
(03:12):
rates over the last decade. In June it was the
fourth highest clearance rate that we've seen over the past
decade in June, and then in July improved even more
and it was the third highest clearance rate that we've
seen for of July months over the last decade. We
haven't quite closed off August, but we're expecting a similar outcome.
You know, even when we look at the big auction
(03:32):
markets of Sydney and Melbourne, they've been consistently performing, consistently
seeing those clearance rates in the low seventies, and I think,
you know, for me, Melbourne is one of those markets
that's really seen a sharp turn around in market dynamics.
Speaker 1 (03:45):
Okay, so clearly there is a lot of confidence, there's
a bit of optimism out there in the market. We've
had three interest rates so far now just one just
this month. The expectation there is that there will be
more to come. What is that going to do then
for prices? Are we going to see this cheaper borrowing
kind of supercharge spring.
Speaker 2 (04:04):
It is absolutely helping to provide momentum. I think it's
giving buyers a bit more confidence, a bit more certainty.
And the interesting dynamic is our capital cities don't necessarily
react the same to a reduction in the cashret What
you tend to find is Sydney and Melbourne a much
more sensitive to changes in the cashret and it's amplified
(04:24):
through their housing markets at a quicker pace than our
other slightly more affordable capital cities. And that is exactly
what we're seeing. We're seeing momentum coming back in more
so to Sydney and Melbourne, and we're seeing those more
affordability driven markets that were Perth and Adelaide. They're still
growing in price, but they're certainly not losing a bit
(04:44):
of momentum compared to what they were seeing. And I
think you opened this question by asking about confidence. You know,
sentiment is a really powerful driver of housing dynamics and
when you look at overall Australia consumer confidence, it is
rising and it's still negative, but it's almost edged into
a positive, so it is rising. And what you tend
(05:05):
to find is when you have consumer sentiment rising, we've
also got the cash rate being reduced. This plays out
historically well for housing dynamics and particularly for sellers of homeowners.
Speaker 1 (05:16):
Yeah, it's interesting, isn't When we talk about that consumer
confidence and that optimism. The sentiment, as you say, it
is still negative, but it's at its highest point in
three and a half years, so it is all relative.
All of a sudden, it feels like anything is possible,
and we are seeing this playing out. We've got prices
in the market have risen was it nine percent in
just six months this year. That's one of the strongest
(05:37):
starts in a decade. Now you would think then that
based on what we have seen now playing out over
the last month, that that pace can continue.
Speaker 2 (05:45):
Look, I'm pretty confident that that pace is going to continue.
And I was always of the view if we saw
the RBA deliver a rate cart in August, that is
going to provide the platform for a robust spring selling season.
And then you've got to also there's a third ynamic here, Michael,
where we've got the government bringing forward their first home
buyer incentive to October, smack bang in the middle of
(06:09):
the spring selling season, right, So all of those first
home buyers that were waiting until next year to make
their purchase will be coming to market in spring. Because
the group of first home buyers that are going to
benefit from this fast tracked first home buyer policy are
going to be the ones that get in first, because
we know that anything on the demand side in terms
(06:30):
of policy does prop up property price, and what we're
likely to see is more affordable sectors of the market
and are going to grow faster, and unit prices will
also grow faster, particularly in our big capital cities that
are most expensive.
Speaker 1 (06:44):
Because part of the changes to the first home Buyers
scheme there was not just bringing it forward, but it
was also increasing the caps, wasn't it For cities in Sydney?
I think it went up to one and a half
million dollars. How important was it for those changes to
be made in order to keep pace with the markets?
Speaker 2 (07:00):
I think it was a very sensible decision to increase
the property price caps. And you're right in Sydney, it's
one point five In Melbourne and it's nine hundred and
fifty thousand. So what this does. It's not necessarily a
game changer for units because the old caps captured quite
a broad spectrum of suburbs for units, but it means
that there's more choice. If a first home buyer is
(07:20):
wanting to purchase a house, they've got more choice in
terms of the suburbs, but they've Also, there's no income caps,
so it doesn't matter if as long as you're a
first time buy it doesn't matter how much you're earning,
you're eligible for. This policy of is designed for all
Australians that are looking to purchase their first home. So
I think the increase in caps basically brings it in
line with where the market is. It gives greater choice,
(07:43):
and I do think that the more choice we provide
it doesn't pig in the whole. First home buyers to
certain suburbs or certain locations, diverse array of suburbs is key.
Giving them choice is key. But irrespective of that, we're
still likely to see prices being pushed. We've got three
really powerful dynamics going on that are going to drive
(08:04):
property prices upwards.
Speaker 1 (08:06):
You made a comment before that really the one to
move earliest are the first home buyers that are going
to be able to take advantage of this. How big
a risk is there that this is really those three
factors that you've said are all going to combine push
house prices up to the point that really first home
buyers are priced out again pretty much by the end
of the year.
Speaker 2 (08:26):
It's an absolute, almost like throwing a firelighter on the
house market in terms of a demand policy. I think
that particularly because there's no caps on the number and
there's no caps on the income. You know, we could
actually be staring down the barrel here of first home
buyer activity competing with levels we saw back in two
thousand and nine when we saw significant increases in grants
(08:50):
available for first home buyers. So I think we have
to be very cautious here that we could really see
a strong way for first home buyer activity coming into
the market. I think the winners here are going to
be those that get in early or already in the
housing market, because what we will absolutely see is stronger
rates of price growth the certain sectors sub sectors of
(09:13):
our housing market.
Speaker 1 (09:14):
Do you think it's going to bring more houses to
market that the announcement by the federal government direct And
we will see an increase now in listings as well,
because there is this kind of hope that the market's
about to get super charged.
Speaker 2 (09:27):
Look, you know, there might be those investors that think,
look now is the right time to sell. You know,
what you tend to find is first time buyers and
investors do compete for similar priced properties. It might be
a good spur as well for the developers, particularly in
pre sales. The development sector. The construction sector is still
very challenged and ultimately, I mean, you know you said
(09:48):
it in your question there, we still have an undersupplied
housing market and the aspect is we still need to
build more homes, and productivity in the construction sector is low.
Build times of lengthened significantly. We need to really still
focus on supply and I'm not a fan of demand policies.
I think it just makes it harder for the next
(10:09):
wave of buyers that come in, and I think we
should be doing everything in our power to ensure that supply,
affordable supply, increased densification, and a diverse array of housing
is delivered across our major capital cities and into some
of our regional markets as well.
Speaker 1 (10:24):
All Right, we are out of time, Nicola, thank you
for talking to Fear and Greed.
Speaker 2 (10:28):
Thank you.
Speaker 1 (10:28):
That was doctor Nicola Powell, head of Research and economics
at Domain. If you've got something that you would like
to know on this podcast, then please send me you
a question on LinkedIn, Instagram, Facebook, or at Fearandegreed dot
com dot au. Are Michael Thompson and this is fear
and greed Q and a
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