Rate Cut No Silver Bullet for Choppy Market

Property developers are weighing renewed market optimism against ongoing challenges after what’s been described as a pivotal moment for the sector: The first interest rate cut since 2020. The Reserve Bank’s decision to lower the cash rate to 4.10 per cent arrives at a critical point for property developers after 13 consecutive rate rises since May of 2022. The cut comes as inflation continues to moderate—underlying inflation was at 3.2 per cent for the December quarter, suggesting inflationary pressures are easing more quickly than expected. “While today’s policy decision recognises the welcome progress on inflation, the Board remains cautious on prospects for further policy easing,” the central bank said in a statement. The 25-basis-point reduction might appear modest, but its significance extends beyond immediate financial impact. It may even signal what industry experts hope could be a pivotal market shift. “Hopefully today’s RBA decision signals the start of a rate-cutting cycle,” Resimax Group founder Ozzie Kheir tells The Urban Developer . ▲ AJ Batra, Paul Jones and Akash Ahluwalia. Kheir says the increased cost of borrowing has “not only flattened the property market in the last two years, but also means developers are getting hit with high holding costs given the lack of sales”. The impact has been widespread. Commercial and residential developers across the country told The Urban Developer that high interest rates have forced fundamental changes to feasibility models, product offerings, and development timelines. LandxWise director Akash Ahluwalia says “higher rates over the past 18 months have placed more emphasis on cost control and strategic financing,” while Jones Real Estate managing director Paul Jones says many clients have been “holding back on acquisitions or expansions due to cost pressures”. Despite these pressures, some developers maintain a longer-term perspective. Above Zero managing director AJ Batra says “interest rates play a role in financing and buyer sentiment, but we take a long-term, fundamentals-driven approach”. “While we continuously assess market conditions, our projects are structured to adapt, ensuring delivery remains on track,” Batra tells The Urban Developer . Batra says his firm monitors market fundamentals to guide future decisions and believes “a signal that rates are stabilising or trending down will likely reinvigorate the established market, creating stronger conditions for downsizers who play a key role in the premium segment”. The changing market has particularly influenced buyer demographics and product offerings, developers says. ▲ Leonard Teplin, Tim Lowe and Ozzie Kheir. “In this environment of high interest rates, buyers’ capacity to borrow has been significantly eroded,” Kheir says. “Of the few buyers that are in the market, almost everyone is looking for affordable product. “There has been a push toward townhouses and smaller detached lots under 300sq m as this is all that most people can afford.” Batra agrees. “Affordability remains a key driver, with some buyers adjusting budgets or prioritising townhouses and well-located medium-density options,” he says. This shift in buyer profile is evident across the sector. Lowe Living co-founder Tim Lowe says the most active buyers are those less constrained by mortgages, particularly downsizers purchasing with cash. “Our experience with buyers in the current property climate is that they’re more focused on realising the full value of their existing properties and getting maximum value for what they currently own, before they look to upgrade,” Lowe tells The Urban Developer . DM Property director Brendan Mullan confirms the trend, saying downsizers have been the most active buyer demographic “given they are generally less reliant on bank financing to buy property, as they have a better net asset position”. While Mullan welcomes the central bank decision, he says more fundamental changes are needed beyond rate cuts. ▲ DM Property directors Brendan Mullan and David Dordevic. “The biggest change for consumers to have greater buying power would come if APRA reduced the 3 per cent serviceability buffer applied to all new loans,” Mullan tells The Urban Developer . “We are in a high-interest rate environment already, so to add another 3 per cent onto those rates seems like the pendulum has swung too far. “[But] the biggest change off the back of RBA’s decision to reduce the cash rate is going to be an increase in consumer confidence, particularly for Victoria.” The rate cut impact extends beyond residential development. Jones Real Estate managing director Paul Jones says it represents “the first real boost to Victoria’s commercial property market in four years”. Jones also expects “an uptick in development activity as feasibility improves and financiers become more flexible”. Knight Frank chief economist Ben Burston says the decision indicates “that the devaluation cycle is ending and that we are turning the corner to a new growth cycle”. ▲ Matt Bell, Nicola Powell and Ben Burston. Its research suggests well-located core assets in Sydney are expected to lead the recovery, with industrial assets first followed by prime CBD offices. Marshall White projects director Leonard Teplin reports positive signs ahead of the expected cut, with “several sales in the past few days as buyers anticipate interest rates will start to decline and remain lower by year-end”. Early indicators suggest renewed market confidence, perhaps none more confident than Oliver Hume chief economist Matt Bell, who says “this is a brave new world for property markets”. “The market typically underestimates the impacts of interest rate changes on prices and activity levels,” Bell says. “Now that the easing cycle has started, we expect increased activity across established and new housing markets.” However, Bell cautions that meaningful change will require sustained policy shifts. “While this single rate cut won’t have a massive direct impact on affordability, the shift into the easing cycle could have a more significant impact on activity, with consumers building potential future rate cuts into their housing budgets.” Domain chief of research and economics Dr Nicola Powell agrees, saying “one rate cut won’t drastically shift the landscape for homeowners or buyers, especially with cautious consumer sentiment”. “But a series of gradual reductions through 2025 will offer much-needed relief, sparking increased housing activity and sales as borrowing power improves.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

Rate Cut No Silver Bullet for Choppy Market

Get the full story.

Sunset Clauses Under Scrutiny as Class Action Costs Developer Millions

Perth Steel Dynasty Bets Big on Brisbane Pipeline

Backyard Density Could Fast-Track Australia’s Housing Supply

Expectations Shift as Apartment Buyers Rewrite the Rules

Melbourne’s 2026 Premium Apartment Market Holds Its Ground

In conversation with Paul Salter | Managing Director, Salter Brothers

2026 Hotel Developer Summit | Panel | Arnaud Millecamps, Trudy Crooks & Ivy Cheng

2026 Hotel Developer Summit | Panel | Nigel Greenaway & Letitia Vitale

25Hours Hotel, The Olympia | Tim Greer | Director, TZG

Sunset Clauses Under Scrutiny as Class Action Costs Developer Millions

Kapitol Named Top Builder Thanks to $3.5bn Workbook

Lendlease’s 3500-Home Plans for Rozelle Bay Move Ahead

Aura Files Two-Tower Seniors Plan for Ashgrove Golf Course

Residential Developer Summit 2026

Adelaide Developer Symposium

Urbanity-26 Conference

The Urban Developer Awards for Industry Excellence