Interest rate cuts create small window of opportunity for new home buyers

WE CAN safely say the Victorian market has now seen the bottom.

While February’s interest rate cut of 0.25 per cent does little for the back pocket of most Australians, what it has done is instil confidence that we are over the worst of it – and it’s ok to transact again.

Land sales are already up in 2025 and enquiries for new home builders are showing signs of being the best post-COVID.

New home buyers will enjoy a window of three to six months where there is plenty of opportunity and still motivated landowners and builders ready to make a deal.

But it will be short lived. Here’s why.

Registered land, ready to build, will dry up. Developer incentives will disappear overnight.

Land sales are on the move. Buyers in the market today are enjoying motivated land sellers offering rebates and discounts up to $40,000. As interest returns to market and land sales escalate, developers will no longer need to incentivise buyers to purchase and will return their rebates and discounts to their bottom lines. Titled land will sell out by mid-late 2025, meaning buyers will again need to add to their names to ballots for land releases or purchase lots that may not be ready for some 12-18 months.

Builder’s incentives will decline

Builders in today’s market are highly competitive and willing to do deals. In some cases, prepared to build at cost to ensure that their forward orders are full, staff and trades employed, and supplier rates maintained for the imminent housing boom. As sales increase over the coming months, builders will again look to creep pricing – either by price rises or reductions in the value of promotions – to increase profitability. Furthermore, as we’ve seen above, land titles pushing out into the future means that builders can’t see the revenue immediately and need to protect margins and plan for supply and trade cost increases over time, also increasing prices, known in the industry as CMA (cost movement allowance).

Prices will rise

The price of purchasing both raw land and new homes will rise mid-late 2025 and through 2026 for a number of reasons. The increased industry demand for supply and trade will allow everyone to begin increasing their rates and make up some of the lost ground over the past few years, where most businesses have struggled to remain profitable. We still have a serious and immediate issue in a lack of qualified trades to conduct the work required to service our housing requirements in Australia. The cost increase will, as always, flow through to the end consumer who, in all cases, ends up paying through increased contract prices.

Rental demand will drive investor’s back to Victoria

Victoria’s high rental demand and escalating rental yields will lead investors nationwide back to Victoria, which, by all measures, is now the most affordable state in Australia. Demand for land in Queensland, NSW and South Australia, has pushed the average house and land package price well above $750,000 where as in new greenfield pockets, such as Charlemont in Geelong, it’s still possible to build a three-bedroom house under $600,000.