2025: it is all about the RBA

BY GARETH KENT, DIRECTOR PRESTON ROWE PATERSON

There is a lot of negative talk about the state of our economy, the politics of the USA, tariffs, Trump, Musk, Ukraine, Gaza, and how it affects Australia.

There is also a lot of wait-and-see, hold-our-breath stuff surrounding the big decision the RBA has on February 17.

Right now, I would not be the Governor of the Reserve Bank of Australia for all the money in the world! Michelle Bullock and her RBA board must make one of Australia’s most historically complex and controversial economic decisions. Will they drop rates and enter an easing cycle? Will they acknowledge inflation is now under control at 2.4 per cent (trimmed mean of 3.2 per mean)? There is a lot riding on it.

Others are trying to influence this decision. Banks have already priced in the expected rate drop, offering long-term fixed rates as low as 4.99 per cent over two-year terms. The federal government is betting its re-election credentials on a rate drop, waiting before announcing the election date. It’s all anyone talks about at the Neck of the Woods coffee shop in Myers Street at 8am – the unofficial morning caffeine fix spot for bankers, finance brokers, valuers, and the odd Pilates instructor.

2025 is shaping up as the year of “recalibration”. There is a lot of positive information starting to flow for our property market. Here are some facts that will make you think about your next investment in the Geelong region now and not waiting on an RBA decision:

In the past 12 months, Victoria’s population has increased by 183,000 people, the biggest jump of any state. The City of Greater Geelong grew by 2.24 per cent. A big driver has been overseas migration, but for the first time since 2020, the Geelong region has attracted a large number of people moving from other states. This should signal an upcoming increase in demand

There has been a tightening in supply; although our population has increased, approved dwellings are sitting 14 per cent below the 10-year average, so we have less properties in the market. Our land estates are still struggling, and construction prices, although falling, are not encouraging new builds

Lending red tape looks to be easing, with total finance commitments for loans in Victoria steadily climbing and now 13 per cent above the 10-year average with $86.2 billion financed. Hence, there is money in the sector.

Simply, more demand and less supply should equal price growth. To date, this has not occurred, with a decline of -2.7 per cent across the last 12 months, and in January 2025 negative growth appears to still be the present trend. But when does it turn?

We have seen the first shoots of change, with a rise in first-home buyer activity across the state, and particularly the Geelong region. However, this activity has been limited to suburbs with a mean house price below $750,000, such as Bell Park ($640,000) and Lara ($720,000).

Here is a little inside industry prediction for you. I am optimistic should the RBA enter an easing cycle, with perhaps two rate cuts before June, confidence in the Geelong middle markets will return. Affordable locations with circa $750,000 average price points, and lower, will experience a much more active market in the latter half of 2025. Unfortunately, the upper end of the market will probably take a lot longer to recover. However, I predict the property market will grow in confidence from June onwards, but by then it may be too late to act. You will be competing with the first home buyers, owner-occupiers, and treechange families from Melbourne.